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 July 2014

 

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: July 25, 2014

 

 

 

 

  

FEMSA Delivers Double Digit Revenue Growth in 2Q14

 

Monterrey, Mexico, July 25, 2014 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the second quarter of 2014.

 

Second Quarter 2014 Highlights:

 

·

FEMSA consolidated total revenues increased 14.4% and income from operations grew 9.0% compared to the second quarter of 2013, reflecting growth at Coca-Cola FEMSA and FEMSA Comercio. On an organic basis1 total revenues and income from operations increased 7.3% and 5.5%, respectively.

 

·

Coca-Cola FEMSA total revenues increased 14.3% and income from operations increased 11.7% compared to the second quarter of 2013, reflecting the integration of Fluminense, Spaipa and Yoli combined with revenue growth in most markets. On an organic basis1 total revenues and income from operations grew 3.2% and 6.6%, respectively.

 

·

FEMSA Comercio achieved total revenues growth of 12.4% and income from operations growth of 8.9% compared to the second quarter of 2013, driven by strong net new store openings and 3.6% growth in same-store sales. On an organic basis1 total revenues and income from operations grew 10.9% and 9.2%, respectively.

 

Carlos Salazar Lomelín, FEMSA CEO, commented: “In light of a continued challenging environment for our businesses, particularly in Mexico, our results for the quarter were solid. At Coca-Cola FEMSA, Mexican volumes again contracted reflecting the adverse backdrop of the excise tax, as well as extremely wet weather that this year seems to have arrived ahead of schedule, yet we continued to successfully implement pricing and packaging strategies that drove revenues and partially offset the negative pressure, together with our continued emphasis on efficiency and cost containment, as well as a generally benign raw material environment. Beyond Mexico, we are also facing challenging operating conditions in certain markets, such as Brazil, while other operations like Colombia are delivering more encouraging growth. At FEMSA Comercio comparable sales for the quarter showed some improvement, but once we adjust for the calendar effects of Semana Santa the growth year-to-date is just above 2 percent, more or less in line with the trend from last year but below our long term expectations. The opening of new stores has been strong, but clearly the Mexican consumer remains under pressure as the much awaited recovery remains elusive.

 

As we look at the second half of the year, we remain confident on our team’s ability to execute our strategy and overcome challenges, and we see more reasons to be optimistic than not. However, the improvement should be gradual as we do not yet see signs of a radically better environment in the months ahead.”

 

1

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

 

 

  

 

  

 

FEMSA Consolidated

 

Total revenues increased 14.4% compared to 2Q13 to Ps. 70.956 billion in 2Q14 driven by Coca-Cola FEMSA and FEMSA Comercio. On an organic basis¹ total revenues increased 7.3% compared to 2Q13.

 

For the first half of 2014, consolidated total revenues increased 14.4% compared to the same period in 2013 to Ps. 136.463 billion driven by Coca-Cola FEMSA and FEMSA Comercio. On an organic basis¹, total revenues for the first half of 2014 increased 6.0% compared to the same period in 2013.

 

Gross profit increased 13.1% compared to 2Q13 to Ps. 29.764 billion in 2Q14. Gross margin decreased 50 basis points compared to the same period in 2013 to 41.9% of total revenues, reflecting a gross margin contraction at Coca-Cola FEMSA among other reasons.

 

For the first half of 2014, gross profit increased 13.6% compared to the same period in 2013 to Ps. 56.923 billion. Gross margin decreased 30 basis points compared to the same period in 2013 to 41.7% of total revenues reflecting a gross margin contraction at Coca-Cola FEMSA among other reasons.

 

Income from operations increased 9.0% compared to 2Q13 to Ps. 7.953 billion in 2Q14. On an organic basis¹ income from operations increased 5.5% compared to the same period in 2013. Consolidated operating margin decreased 60 basis points compared to 2Q13 to 11.2% of total revenues in 2Q14, driven by margin contraction at Coca-Cola FEMSA and FEMSA Comercio.

 

For the first half of 2014, income from operations increased 12.4% compared to the same period in 2013 to Ps. 14.050 billion. On an organic basis¹ income from operations increased 6.8%. Our consolidated operating margin year-to-date decreased 20 basis points to 10.3% as a percentage of total revenues as compared to the same period of 2013.

 

Our effective income tax rate was 37.3% in 2Q14 compared to 31.2% in 2Q13 reflecting a larger relative profit contribution from operations with higher tax rates and changes to the deductibility of certain employee benefits in Mexico.

 

Net consolidated income decreased 12.1% compared to 2Q13 to Ps. 4.463 billion in 2Q14, mainly as a result of i) higher financing expenses related to bonds issued recently by Coca-Cola FEMSA, ii) a decrease in FEMSA’s reported 20% participation in Heineken’s results, and iii) a tough comparison related to a foreign exchange gain at FEMSA in 2Q13. These effects were partially offset by the growth in income from operations.

 

For the first half of 2014, net consolidated income decreased 8.1% to Ps. 8.326 billion compared to the same period of 2013, reflecting i) higher financing expenses related to bonds issued recently by FEMSA and Coca-Cola FEMSA, ii) a decrease in FEMSA’s reported 20% participation in Heineken’s results, and iii) a tough comparison related to a foreign exchange gain at FEMSA in 2Q13. These effects were partially offset by the growth in income from operations.

 

Net majority income for 2Q14 was Ps. 0.84 per FEMSA Unit². Net majority income per FEMSA ADS was US$ 0.65 for the second quarter of 2014. For the first half of 2014, net majority income per FEMSA Unit¹ was Ps. 1.56 (US$ 1.20 per ADS).

 

Capital expenditures amounted to Ps. 3.951 billion in 2Q14, reflecting slightly incremental investments at Coca-Cola FEMSA and FEMSA Comercio.

 

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 June 30, 2014 was 3,578,226,270, equivalent to the total number of FEMSA Shares outstanding as of the same date, divided by 5.

 

 

 

 

 

 

Our consolidated balance sheet as of June 30, 2014 recorded a cash balance of Ps. 36.785 billion (US$ 2.836 billion), an increase of Ps. 9.400 billion (US$ 724.8 million) compared to December 31, 2013. Short-term debt was Ps. 2.205 billion (US$ 170.0 million), while long-term debt was Ps. 73.787 billion (US$ 5.689 billion). Our consolidated net debt balance was Ps. 39.207 billion (US$ 3.023 billion).

 

Soft Drinks – 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 12.4% compared to 2Q13 to Ps. 27.896 billion in 2Q14, mainly driven by the opening of 348 net new stores in the quarter reaching 1,189 total net new store openings for the last twelve months. On an organic basis³, total revenues increased 10.9% compared to 2Q13. As of June 30, 2014, FEMSA Comercio had a total of 12,204 convenience stores. Same-store sales increased an average of 3.6% for the second quarter of 2014 over 2Q13, driven by an undemanding calendar comparison reflecting the timing of Semana Santa, which more than compensated for the negative impact from excise taxes on key categories and incremental VAT in northern border cities. Same-store sales performance was driven by a 4.3% increase in average customer ticket that offset a 0.7% decrease in store traffic.

 

For the first half of 2014, total revenues increased 12.4% compared to the same period in 2013 to Ps. 52.267 billion. On an organic basis³, total revenues for the first half of 2014 increased 9.7% compared to the same period in 2013. FEMSA Comercio’s same-store sales increased an average of 2.1% compared to the same period in 2013, driven by a 2.3% increase in average customer ticket that offset a 0.2% decrease in store traffic.

 

Gross profit increased by 13.3% in 2Q14 compared to 2Q13, resulting in a 30 basis point gross margin expansion to 34.9% of total revenues. This increase reflects a more effective collaboration and execution with our key supplier partners, including our achievement of certain sales objectives with some of these partners, and the corresponding benefit accrued to us, as well as more efficient use of promotion-related marketing resources. For the first half of 2014, gross margin expanded by 10 basis points compared to the same period in 2013 to 34.1% of total revenues.

 

Income from operations increased 8.9% over 2Q13 to Ps. 2.126 billion in 2Q14. On an organic basis³, income from operations increased 9.2% in 2Q14 compared to 2Q13. Operating expenses increased 14.6% in 2Q14 to Ps. 7.598 billion, driven by the incorporation of FEMSA Comercio’s new drugstore and quick-service-restaurant operations, by the strong growth in new stores, and by the continued rollout of new initiatives. Operating margin contracted 30 basis points compared to 2Q13, to 7.6% of total revenues in 2Q14.

 

For the first half of 2014, income from operations increased 8.1% compared to the same period in 2013 to Ps. 3.161 billion, resulting in an operating margin of 6.0%, which represents a 30 basis point contraction from the same period in the prior year, driven by the incorporation of FEMSA Comercio’s new drugstore and quick-service-restaurant operations, by the strong growth in new stores, and by the continued rollout of new initiatives. On an organic basis³, income from operations increased 7.4% in 2Q14 compared to the same period in 2013.

 

3

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

  

 

 

  

 

  

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 June 30, 2014, which was 12.9695 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 second quarter of:																								For the sixth months of:
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Total revenues			70,956				100.0				62,047				100.0				14.4				7.3				136,463				100.0				119,289				100.0				14.4				6.0
Cost of sales			41,192				58.1				35,722				57.6				15.3								79,540				58.3				69,194				58.0				15.0
Gross profit			29,764				41.9				26,325				42.4				13.1								56,923				41.7				50,095				42.0				13.6
Administrative expenses			2,733				3.9				2,409				3.9				13.4								5,415				4.0				4,698				3.9				15.3
Selling expenses			18,620				26.2				16,774				26.9				11.0								36,855				27.0				32,766				27.5				12.5
Other Operating expenses (income), net (1)			458				0.6				(152	)			(0.2	)			N.A.								603				0.4				132				-				N.A.
Income from operations(2)			7,953				11.2				7,294				11.8				9.0				5.5				14,050				10.3				12,499				10.5				12.4				6.8
Other Non-Operating expenses (income)			91								127								(28.3	)							52								121								(57.0	)
Interest expense			1,675								939								78.4								3,360								1,599								N.A.
Interest income			195								202								(3.5	)							503								381								32.0
Foreign exchange loss (gain)			(52	)							85								N.A.								(5	)							126								N.A.
Other financial expenses (income), net.			386								138								N.A.								402								252								59.5
Financing expenses, net			1,814								960								89.0								3,254								1,596								N.A.
Income before income tax and Participation in Associates results			6,048								6,207								(2.6	)							10,744								10,782								(0.4	)
Income tax			2,253								1,939								16.2								3,789								3,447								9.9
Participation in associates results(3)			668								810								(17.5	)							1,371								1,720								(20.3	)
Net consolidated income			4,463								5,078								(12.1	)							8,326								9,055								(8.1	)
Net majority income			3,018								3,565								(15.3	)							5,591								6,216								(10.1	)
Net minority income			1,445								1,513								(4.5	)							2,735								2,839								(3.7	)
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Operative Cash Flow & CAPEX
Income from operations			7,953				11.2				7,294				11.8				9.0				5.5				14,050				10.3				12,499				10.5				12.4				6.8
Depreciation			2,430				3.4				2,057				3.3				18.1								4,748				3.5				4,065				3.4				16.8
Amortization & other non-cash charges			902				1.3				147				0.2				N.A.								1,395				1.0				544				0.4				N.A.
Operative Cash Flow (EBITDA)			11,285				15.9				9,498				15.3				18.8				14.5				20,193				14.8				17,108				14.3				18.0				12.1
CAPEX			3,951								3,581								10.4								7,014								6,867								2.1
Financial Ratios			2014								2013								Var. p.p.
Liquidity(4)			1.53								1.51								0.03
Interest coverage(5)			7.63								12.89								(5.26	)
Leverage(6)			0.63								0.61								0.02
Capitalization(7)			25.58	%							25.79	%							(0.21	)

 

^(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⁾ Mainly 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		Jun-14				Dec-13				% Var.
Cash and cash equivalents			36,785				27,385				34.3
Accounts receivable			12,269				13,641				(10.1	)
Inventories			17,109				18,289				(6.5	)
Other current assets			13,306				14,254				(6.7	)
Total current assets			79,469				73,569				8.0
Investments in shares			95,995				98,330				(2.4	)
Property, plant and equipment, net			74,418				73,955				0.6
Intangible assets (1)			104,200				103,293				0.9
Other assets			10,907				10,045				8.6
TOTAL ASSETS			364,989				359,192				1.6
LIABILITIES & STOCKHOLDERS´ EQUITY
Bank loans			222				529				(58.0	)
Current maturities of long-term debt			1,983				3,298				(39.9	)
Interest payable			424				409				3.7
Operating liabilities			49,294				44,633				10.4
Total current liabilities			51,923				48,869				6.2
Long-term debt (2)			73,787				72,185				2.2
Labor liabilities			4,047				4,074				(0.7	)
Other liabilities			11,934				11,514				3.7
Total liabilities			141,691				136,642				3.7
Total stockholders’ equity			223,298				222,550				0.3
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			364,989				359,192				1.6

 

		June 30, 2014
DEBT MIX (2)		% of Total				Average Rate
Denominated in:
Mexican pesos			42.9	%			5.2	%
Dollars			19.7	%			6.2	%
Colombian pesos			1.4	%			5.4	%
Argentine pesos			1.1	%			27.2	%
Brazilian Reais			34.8	%			10.0	%
Total debt			100	%			7.3	%
Fixed rate(2)			60.9	%
Variable rate(2)			39.1	%

 

% of Total Debt		2014				2015				2016				2017				2018				2019 +
DEBT MATURITY PROFILE			1.6	%			1.5	%			6.0	%			3.6	%			24.6	%			62.7	%

 

⁽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 second quarter of:																								For the sixth months of:
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Total revenues			41,434				100.0				36,260				100.0				14.3				3.2				81,412				100.0				70,852				100.0				14.9				2.6
Cost of sales			21,886				52.8				19,075				52.6				14.7								43,320				53.2				37,602				53.1				15.2
Gross profit			19,548				47.2				17,185				47.4				13.8								38,092				46.8				33,250				46.9				14.6
Administrative expenses			1,784				4.3				1,563				4.3				14.1								3,560				4.4				3,019				4.3				17.9
Selling expenses			11,620				28.0				10,634				29.3				9.3								23,305				28.7				20,851				29.4				11.8
Other Operating expenses (income), net			402				1.0				(154	)			(0.4	)			N.A.								526				0.6				79				0.1				N.A.
Income from operations			5,742				13.9				5,142				14.2				11.7				6.6				10,701				13.1				9,301				13.1				15.1				7.7
Depreciation			1,704				4.1				1,513				4.2				12.6								3,318				4.1				2,948				4.2				12.6
Amortization & other non-cash charges			796				1.9				20								N.A.								1,191				1.5				321				0.4				N.A.
Operative Cash Flow			8,242				19.9				6,675				18.4				23.5				17.4				15,210				18.7				12,570				17.7				21.0				13.2
CAPEX			2,416								2,347								2.9								4,048								4,591								(11.8	)
Sales volumes
(Millions of unit cases)
Mexico and Central America			506.8				59.9				523.4				65.7				(3.2	)			(6.6	)			948.1				56.9				959.6				62.8				(1.2	)			(5.3	)
South America			178.0				21.1				168.0				21.1				6.0				6.0				365.7				22.0				345.0				22.6				6.0				6.0
Brazil			160.7				19.0				105.3				13.2				52.7				1.7				351.2				21.1				222.6				14.6				57.8				5.0
Total			845.5				100.0				796.7				100.0				6.1				(2.8	)			1,665.0				21.1				1,527.2				14.6				57.8				5.0

 

^(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 second quarter of:																								For the sixth months of:
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Total revenues			27,896				100.0				24,808				100.0				12.4				10.9				52,267				100.0				46,511				100.0				12.4				9.7
Cost of sales			18,172				65.1				16,228				65.4				12.0								34,441				65.9				30,708				66.0				12.2
Gross profit			9,724				34.9				8,580				34.6				13.3								17,826				34.1				15,803				34.0				12.8
Administrative expenses			526				1.9				499				2.0				5.4								1,026				2.0				962				2.1				6.7
Selling expenses			7,027				25.2				6,103				24.6				15.1								13,570				26.0				11,873				25.5				14.3
Other Operating expenses (income), net			45				0.2				26				0.1				73.1								69				0.1				45				0.1				53.3
Income from operations			2,126				7.6				1,952				7.9				8.9				9.2				3,161				6.0				2,923				6.3				8.1				7.4
Depreciation			677				2.4				525				2.1				29.0								1,346				2.6				1,070				2.3				25.8
Amortization & other non-cash charges			71				0.3				114				0.4				(37.7	)							145				0.3				168				0.3				(13.7	)
Operative Cash Flow			2,874				10.3				2,591				10.4				10.9				10.9				4,652				8.9				4,161				8.9				11.8				10.8
CAPEX			1,262								1,232								2.5								2,160								2,044								5.7
Information of OXXO Stores
Total stores			348								279																12,204								11,015								10.8
Net new convenience stores:
vs. March prior year			1,189								1,026								15.9
vs. December prior year			483								414								16.7
Same store data: (1)
Sales (thousands of pesos)			710.3								685.6								3.6								669.1								655.4								2.1
Traffic (thousands of transactions)			24.9								25.1								(0.7	)							24.0								24.0								(0.2	)
Ticket (pesos)			28.5								27.3								4.3								27.9								27.3								2.3

 

⁽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								Jun-14								Dec-13
		2Q 2014				LTM(1)  Mar-14				Per USD				Per Mx. Peso				Per USD				Per Mx. Peso
Mexico			-0.33	%			3.75	%			13.03				1.0000				13.08				1.0000
Colombia			1.04	%			2.79	%			1,881.19				0.0069				1,926.83				0.0068
Venezuela			17.87	%			62.15	%			10.60				1.2295				6.30				2.0756
Brazil			1.54	%			6.52	%			2.20				5.9170				2.34				5.5820
Argentina			4.58	%			21.88	%			8.13				1.6024				6.52				2.0053
Euro Zone			0.15	%			0.50	%			0.74				17.6972				0.73				17.9816

 

⁽¹⁾ LTM = Last twelve months

 

  

 

 

		2014 SECOND - QUARTER AND FIRST SIX MONTHS RESULTS
					Second quarter						Excluding M&A		YTD						Excluding M&A
					2014		2013		Reported Δ%		effects Δ%(5)		2014		2013		Reported Δ%		effects Δ%(5)
		Total revenues			41,434		36,260		14.3	%	3.2	%	81,412		70,852		14.9	%	2.6	%
		Gross profit			19,548		17,185		13.8	%	5.0	%	38,092		33,250		14.6	%	4.9	%
		Operating income			5,742		5,142		11.7	%	6.6	%	10,701		9,301		15.1	%	7.7	%
		Net income attributable to equity holders of the company			2,679		2,807		-4.6	%			5,076		5,280		-3.9	%
		Earnings per share(1)			1.29		1.37
		Operative cash flow(2)			8,242		6,675		23.5	%	17.4	%	15,210		12,570		21.0	%	13.2	%
					LTM 2Q 2014		FY 2013		Δ%
		Net debt (3)			41,031		45,155		-9.1	%
		Net debt / Operative cash flow			1.34		1.58
		Operative cash flow/ Interest expense, net			6.98		10.64
		Capitalization (4)			35.0	%	34.7	%
		Expressed in millions of Mexican pesos.
		(1) Quarterly earnings / Outstanding shares as of the end of period. Outstanding shares as of 2Q'13 were 2,047.8 million. Outstanding shares as of 2Q'14 were 2,072.9 million.
		(2) Operative cash flow = Operating income + Depreciation + Amortization & Other operative non-cash charges.
		(3) Net debt = Total debt - Cash
		(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. 41,434 million in the second quarter of 2014, an increase of 14.3% as compared to the second quarter of 2013. On a currency neutral basis and excluding the non-comparable effect of the integration of Grupo Yoli (“Yoli”) in our Mexican territories, Companhia Fluminense de Refrigerantes (“Fluminense”) and Spaipa S.A. Industria Brasileira de Bebidas (“Spaipa”) in our Brazilian operation, total revenues grew 20.5%.
			Reported operating income reached Ps. 5,742 million in the second quarter of 2014, an increase of 11.7% as compared to the same period of the previous year, resulting in an operating margin of 13.9%.
			Reported operative cash flow grew 23.5% to Ps. 8,242 million in the second quarter of 2014, as compared to the same period in 2013. Our reported operative cash flow margin expanded 150 basis points to 19.9%. Excluding the recently integrated territories, operating cash flow margin expanded 250 basis points to 20.9%.
			Reported consolidated net controlling interest income reached Ps. 2,679 million in the second quarter of 2014.
		Mexico City July 23, 2014, 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 second quarter of 2014.
		“In the second quarter, our operators delivered organic double-digit operating cash flow growth and margin expansion in both of our divisions. Despite weak volume performance in Mexico, resulting from the new tax environment as well as bad weather conditions, our operation stayed the course to improve its profitability thanks to our revenue management initiatives, our lower raw material costs, our ability to restructure our operations, and our relentless focus on generating operating efficiencies. In South America, we are successfully integrating Spaipa and Fluminense in our Brazilian operation and delivering on our targets for top- and bottom-line organic growth in every country. As we face the second half of the year, our operators are prepared to continue meet each market's challenges, working every day to enhance our marketplace execution, grow our top-line, and protect the profitability and cash flow generation of our business, while continuing to deliver increased value to our shareholders,” said John Santa Maria Otazua, Chief Executive Officer of the Company.

 

 

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

 

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

 

As of the first quarter of 2014, Coca-Cola FEMSA has adopted the state-run Supplementary Currency Administration System (SICAD) alternate exchange rate to translate its Venezuelan operation’s results into its reporting currency, the Mexican peso. The SICAD exchange rate used to translate the second quarter and first six months results was 10.60 bolivars per U.S. dollar as per the auction held on June 25, 2014.

 

Our reported total revenues increased 14.3% to Ps. 41,434 million in the second quarter of 2014, compared to the second quarter of 2013, driven by (i) the integration of Fluminense and Spaipa in our Brazilian territories and Yoli in our Mexican operation,⁽¹⁾⁽²⁾ (ii) revenue growth in Venezuela, despite using the SICAD exchange rate for translation purposes, and (iii) revenue growth in our Central American, Colombian, and Brazilian operations. Excluding the recently integrated territories in Brazil and Mexico,⁽¹⁾⁽²⁾ total revenues increased 3.2%. On a currency neutral basis and excluding the new franchises in Brazil and Mexico,⁽¹⁾⁽²⁾ total revenues grew 20.5%, mainly driven by average price per unit case growth in most of our territories, and volume growth in Colombia, Venezuela, Central America and Brazil.

 

Reported total sales volume increased 6.1% to reach 845.6 million unit cases in the second quarter of 2014 as compared to the same period in 2013. Excluding the integration of Fluminense and Spaipa in Brazil and Yoli in Mexico,⁽¹⁾⁽²⁾ volumes decreased 2.8% to 774.3 million unit cases, mainly driven by the volume contraction originated by the price increases that were implemented due to the excise tax in Mexico. On the same basis, the still beverage category remained flat. Our sparkling beverage, bulk water and bottled water categories decreased 2.2%, 8.3% and 2.2%, respectively.

 

Our reported gross profit increased 13.8% to Ps. 19,548 million in the second quarter of 2014, as compared to the same period of 2013. Lower sweetener and PET prices in most of our territories were offset by the depreciation of the average exchange rate of the currencies in our South America division⁽³⁾ and the Mexican peso⁽³⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 47.2% in the second quarter of 2014.

 

Our reported operating income increased 11.7% to Ps. 5,742 million in the second quarter of 2014 and our reported operating margin was 13.9%. Excluding the integration of the new territories in Brazil and Mexico,⁽¹⁾⁽²⁾ operating income increased 6.6%, reaching Ps. 5,479 million and representing an operating margin of 14.6%. Excluding the non-comparable effect of Fluminense, Spaipa and Yoli,⁽¹⁾⁽²⁾ operating expenses decreased as a percentage of revenues in most of our territories.

 

During the second quarter of 2014, the other operative expenses, net line recorded an expense of Ps. 302 million, mainly due to (i) an operative currency fluctuation effect in one of our subsidiaries in the South America division, (ii) the loss on sale of certain fixed assets and (iii) restructuring charges in our Mexican operation.

 

The share of the profits of associates and joint ventures line recorded a loss of Ps. 100 million in the second quarter of 2014, mainly due to an equity method loss from our participation in Coca-Cola Bottlers Philippines, Inc., and Estrella Azul in Panama, which were partially compensated by an equity method gain from our non-carbonated beverage joint ventures.

 

Reported operative cash flow grew 23.5% to Ps. 8,242 million in the second quarter of 2014 as compared to the same period in 2013. Our reported operative cash flow margin expanded 150 basis points to reach 19.9% in the second quarter of 2014.

 

Our comprehensive financing result in the second quarter of 2014 recorded an expense of Ps. 1,609 million as compared to an expense of Ps. 1,087 million in the same period of 2013. This increase was mainly driven by (i) higher interest expenses due to a larger debt position resulting from the financing of the most recent acquisitions in Brazil, (ii) higher interest rates related to the Brazilian real denominated debt balance, and (iii) a larger monetary position and a higher inflation rate in Venezuela.

 

During the second quarter of 2014, income tax, as a percentage of income before taxes, was 34.9% as compared to 28.4% in the same period of 2013. The lower effective tax rate registered during 2013 resulted mainly from a tax shield related to interests on capital, included in a dividend declared by our Brazilian subsidiary. The higher effective tax rate registered during 2014 was affected by changes to the income tax law in Mexico and a larger profit contribution from operations with higher tax rates.

 

Our reported consolidated net controlling interest income reached Ps. 2,679 million in the second quarter of 2014. Earnings per share (EPS) in the second quarter of 2014 were Ps. 1.29 (Ps. 12.92 per ADS) computed on the basis of 2,072.9 million shares (each ADS represents 10 local shares).

 

(1)

The Company’s South America division’s operating results include the non-comparable effect of Fluminense’s and Spaipa’s results for the months of April, 2014 through June, 2014.

(2)

The Company’s Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of April, 2014 and May, 2014.

(3)

See page 13 for average and end of period exchange rates for the second quarter and the first six months of 2014.

 

 

 

As of June 30, 2014, we had a cash balance of Ps. 19,235 million, including US$ 485 million denominated in U.S. dollars, an increase of Ps. 3,929 million compared to December 31, 2013. This difference was mainly driven by cash generated by our operations.

 

During January, 2014, we issued (i) US$150 million aggregate principal amount of additional 3.875% senior notes and (ii) US$200 million aggregate principal amount of additional 5.250% senior notes. The proceeds of these Senior Notes were mainly used for debt refinancing purposes.

 

As of June 30, 2014, total short-term debt was Ps. 1,928 million and long-term debt was Ps. 58,338 million. Total debt decreased by Ps. 195 million, compared to year end 2013. Net debt decreased Ps. 4,124 million compared to year end 2013.

 

The weighted average cost of debt for the quarter was 7.71%. The following charts set forth the Company’s debt profile by currency and interest rate type and by maturity date as of June 30, 2014.

 

Currency		% Total Debt(1)				% Interest Rate Floating(1)(2)
Mexican pesos			29.4	%			24.9	%
U.S. dollars			24.7	%			0.0	%
Colombian pesos			1.8	%			100.0	%
Brazilian reals			42.8	%			97.4	%
Argentine pesos			1.4	%			43.1	%

(1)

After giving effect to interest rate swaps

(2)

Calculated by weighting each year’s outstanding debt balance mix

 

Debt Maturity Profile

 

Maturity Date		2014				2015				2016				2017				2018				2019+
% of Total Debt			1.8	%			1.7	%			7.6	%			0.4	%			28.8	%			59.7	%

 

 

 

 

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 and Central America division as of February 2013.

 

Revenues 

 

Reported total revenues from our Mexico and Central America division increased 1.8% to Ps. 19,047 million in the second quarter of 2014, as compared to the same period in 2013, supported by the non-comparable effect of the integration of Yoli in our Mexican operations.⁽¹⁾ Excluding the integration of Yoli in Mexico,⁽¹⁾ total revenues decreased 2.1%, mainly as a consequence of a volume contraction originated by the price increases that were implemented due to the excise tax in Mexico. Our average price per unit case, which is presented net of taxes, grew 5.1% on an organic basis, reaching Ps. 37.40, mainly supported by a price increase implemented in Mexico at the end of the first quarter of 2014. On a currency neutral basis and excluding Yoli in Mexico,⁽¹⁾ total revenues in the division decreased 2.1%.

 

Reported total sales volume decreased 3.2% to 506.8 million unit cases in the second quarter of 2014, as compared to the second quarter of 2013. Excluding the integration of Yoli,⁽¹⁾ volumes decreased 6.6% reaching 489.1 million unit cases. On the same basis, our sparkling beverage, bulk water, still beverage and bottled water categories decreased 5.7%, 8.2%, 11.2% and 8.0%, respectively.

 

Operating Income 

 

Our reported gross profit increased 5.8% to Ps. 9,849 million in the second quarter of 2014 as compared to the same period in 2013. Lower sweetener and PET prices in the division were partially offset by the depreciation of the average exchange rate of the Mexican peso⁽²⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 51.7% in the second quarter of 2014, an expansion of 200 basis points as compared to the same period of the previous year.

 

Reported operating income⁽³⁾ remained flat at Ps. 3,370 million in the second quarter of 2014. Our reported operating margin reached 17.7% in the second quarter of 2014. Excluding the non-comparable effect of Yoli in Mexico,⁽¹⁾ operating income was Ps. 3,313 million, representing an operating margin of 18.1%. On the same basis, operating expenses in the division decreased 1.6% as compared with the second quarter of 2013.

 

Reported operative cash flow grew 12.2% to Ps. 4,680 million in the second quarter of 2014 as compared to the same period in 2013. Our reported operative cash flow margin was 24.6%, an expansion of 230 basis points.

 

(1)

The Company’s Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of April, 2014 and May, 2014.

(2)

See page 13 for average and end of period exchange rates for the second quarter and the first six months of 2014.

(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 and Central America division.

 

 

 

As of the first quarter of 2014, Coca-Cola FEMSA has adopted the state-run Supplementary Currency Administration System (SICAD) alternate exchange rate to translate its Venezuelan operation’s results into its reporting currency, the Mexican peso. The SICAD exchange rate used to translate the second quarter and first six months results was 10.60 bolivars per U.S. dollar as per the auction held on June 25, 2014.

Volume and average price per unit case exclude beer results.

 

Revenues

 

Reported total revenues were Ps. 22,386 million in the second quarter of 2014, an increase of 27.6% as compared to the same period of 2013, as a result of (i) the integration of Fluminense and Spaipa in Brazil,⁽¹⁾ (ii) revenue growth in our Venezuelan operation, despite using the SICAD exchange rate for translation purposes in this country, (iii) revenue growth in our Colombian and Brazilian operations, and (iv) despite the negative translation effect of the devaluation of the Argentine peso,⁽²⁾ the Brazilian real⁽²⁾ and the Colombian peso.⁽²⁾ Excluding beer, which accounted for Ps. 1,553 million during the quarter, revenues increased 24.5% to Ps. 20,833 million. On a currency neutral basis and excluding Fluminense and Spaipa,⁽¹⁾ total revenues increased 44.7% due to average price per unit case increases in Venezuela, Argentina and Brazil, and volume growth in Colombia, Venezuela and Brazil.

 

Reported total sales volume in our South America division increased 24.0% to 338.9 million unit cases in the second quarter of 2014 as compared to the same period of 2013, as a result of the integration of Fluminense and Spaipa in Brazil⁽¹⁾ and volume growth in Colombia, Venezuela and Brazil. Excluding the non-comparable effect of the acquisitions in Brazil,⁽¹⁾ volume increased 4.4% to 285.3 million unit cases. On the same basis, the sparkling beverage category grew 3.5%, mainly driven by the performance of Coca-Cola in Colombia, Venezuela and Brazil. The still beverage category grew 20.4% driven by the Jugos del Valle line of business in the division, including growth of del Valle Fresh in Colombia and Venezuela. Our bottled water portfolio grew 8.6% driven by Crystal in Brazil. These increases compensated for a volume decline in our bulk water category in Colombia and Venezuela.

 

Operating Income

 

Reported gross profit reached Ps. 9,698 million, an increase of 23.1% in the second quarter of 2014, as compared to the same period of 2013. In local currency, lower sweetener and PET prices in most of our territories were compensated by the depreciation of the average exchange rate of the Argentine peso,⁽²⁾ the Brazilian real⁽²⁾ and the Colombian peso⁽²⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 43.3% in the second quarter of 2014.

 

Our reported operating income increased 32.6% to Ps. 2,373 million in the second quarter of 2014, compared to the same period of 2013, mainly as a result of the integration of Fluminense and Spaipa in Brazil,⁽¹⁾ and operating income growth in all of the territories of our South America division, both of which were partially offset by the negative translation effect of using the SICAD exchange rate to translate the results of our Venezuelan operation and the depreciation of the currencies of the rest of this division. Excluding the recently integrated territories in Brazil, operating expenses increased only 1.7%, despite higher labor and freight costs in Venezuela, Brazil and Argentina and continued marketing investments to support our marketplace execution and bolster our returnable packaging base in Brazil. Our reported operating margin expanded 40 basis points to 10.6% in the second quarter of 2014.

 

Reported operative cash flow grew 42.2% to Ps. 3,562 million in the second quarter of 2014 as compared to the same period in 2013. Our reported operative cash flow margin expanded 160 basis points to 15.9%.

 

(1)

The Company’s South America division’s operating results include the non-comparable effect of Fluminense’s and Spaipa’s results for the months of April, 2014 through June, 2014.

(2)

See page 13 for average and end of period exchange rates for the second quarter and the first six months of 2014.

 

 

 

The Company’s Mexico & Central America divisions’ operating results include the non-comparable effect of Grupo Yoli’s results for the months of January, 2014 through May, 2014.

 

The Company’s South America divisions’ operating results include the non-comparable effect of Fluminense’s and Spaipa’s results for the months of January, 2014 through June, 2014.

 

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.

 

As of the first quarter of 2014, Coca-Cola FEMSA has adopted the state-run Supplementary Currency Administration System (SICAD) alternate exchange rate to translate its Venezuelan operation’s results into its reporting currency, the Mexican peso. The SICAD exchange rate used to translate the second quarter and first six months results was 10.60 bolivars per U.S. dollar as per the auction held on June 25, 2014.

 

Our reported consolidated total revenues increased 14.9% to Ps. 81,412 million in the first six months of 2014, as compared to the same period of 2013, driven by (i) the integration of Fluminense and Spaipa in our Brazilian territories and Yoli in our Mexican operation,⁽¹⁾⁽²⁾ (ii) revenue growth in our Venezuelan operation, despite using the SICAD exchange rate for translation purposes, (iii) revenue growth in Central America, Brazil and Colombia, and (iv) despite the negative translation effect originated by the devaluation of the currencies in most of our territories.⁽³⁾ Excluding the recently integrated territories in Brazil and Mexico,⁽¹⁾⁽²⁾ total revenues grew 2.6%. On a currency neutral basis and excluding the non-comparable effect of Fluminense and Spaipa in Brazil, and Yoli in Mexico,⁽¹⁾⁽²⁾ total revenues grew 22.5%, in the first six months of 2014.

 

Reported total sales volume increased 9.0% to 1,665.0 million unit cases in the first six months of 2014, as compared to the same period in 2013. Excluding the integration of Fluminense and Spaipa in Brazil, and Yoli in Mexico,⁽¹⁾⁽²⁾ volumes decreased 1.5% to 1,504.7 million unit cases, mainly due to the volume contraction originated by the price increases that were implemented due to the excise tax in Mexico. On the same basis, the bottled water portfolio grew 4.1%, driven by Crystal in Brazil. The still beverage category grew 4.0%, mainly driven by the performance of the Jugos del Valle line of business and Powerade across most of our territories. These increases partially compensated for a volume decline in our sparkling beverage category and our bulk water business.

 

Our reported gross profit increased 14.6% to Ps. 38,092 million in the first six months of 2014, as compared to the same period of 2013. Lower sugar and PET prices in most of our operations were offset by the depreciation of the average exchange rate of the Argentine peso,⁽³⁾ the Brazilian real,⁽³⁾ the Colombian peso⁽³⁾ and the Mexican peso⁽³⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 46.8%.

 

Our reported operating income increased 15.1% to Ps. 10,701 million in the first six months of 2014 and our reported operating margin was 13.1%. Excluding the integration of the new territories in Brazil and Mexico,⁽¹⁾⁽²⁾ operating income increased 7.7%, reaching Ps. 10,016 million, representing an operating margin of 13.8%. Excluding the non-comparable effect of Fluminense, Spaipa and Yoli,⁽¹⁾⁽²⁾ operating expenses decreased as a percentage of revenues in most of our territories.

 

During the first six months of 2014, the other operative expenses, net line recorded an expense of Ps. 360 million, mainly related to (i) an operative currency fluctuation effect in one of our subsidiaries in the South America division, (ii) the loss on sale of certain fixed assets and (iii) restructuring charges in our Mexican operations.

 

The share of the profits of associates and joint ventures line recorded a loss of Ps. 166 million in the first six months of 2014, mainly due to an equity method loss from our participation in Coca-Cola Bottlers Philippines, Inc., and Estrella Azul in Panama, which were partially compensated by an equity method gain from our non-carbonated beverage joint ventures.

 

Reported operative cash flow grew 21.0% to Ps. 15,210 million in the first six months of 2014 as compared to the same period in 2013. Our reported operative cash flow margin expanded 100 basis points to 18.7%.

 

Our consolidated net controlling interest income reached Ps. 5,076 million in the first six months of 2014. Earnings per share (EPS) in the first six months of 2014 were Ps. 2.45 (Ps. 24.49 per ADS) computed on the basis of 2,072.9 million shares outstanding (each ADS represents 10 local shares).

 

(1)

The Company’s South America division’s operating results include the non-comparable effect of Fluminense’s and Spaipa’s results for the months of January, 2014 through June, 2014.

(2)

The Company’s Mexico & Central America division’s operating results include the non-comparable effect of Grupo Yoli’s results for the months of January, 2014 through May, 2014.

(3)

See page 13 for average and end of period exchange rates for the second quarter and the first six months of 2014.

 

 

 

Philippines Operation

 

Volume during the second quarter was down low single digits as compared to the same period of the previous year. Supported by the launch of an additional presentation one-way PET of 250ml, brand Coca-Cola grew more than 8% in the quarter. We continue with the expansion of our Route-to-Market model, reaching now more than 240,000 clients with more than 1,700 pre-sellers. Volume in the Greater Manila Area, where the rollout of this model has been completed, grew close to 4% in the quarter. During the quarter, we installed two new production lines to reinforce our single-serve one way PET capacity, supporting our portfolio strategy.

 

RECENT DEVELOPMENTS

 

As of May, 2014 Coca-Cola FEMSA paid the first installment of the 2013 dividend in the amount of Ps. 3,005.7 million, representing an amount of Ps. 1.45 per share.

 

As of the first quarter of 2014, Coca-Cola FEMSA has adopted the state-run Supplementary Currency Administration System (SICAD) currency rate to translate its Venezuelan operation’s results into its reporting currency, the Mexican peso. The exchange rate used to translate the second quarter and first six months results was 10.60 bolivars per U.S. dollar as per the auction held on June 25, 2014. As per the most recent Government auction held on July 16, 2014 the SICAD exchange rate was 11.00 bolivars per U.S. dollar. As of July 22, 2014, the SICAD II exchange rate was 49.99 bolivars per U.S. dollar.

 

CONFERENCE CALL INFORMATION

 

Our second quarter 2014 conference call will be held on July 23, 2014, at 12:00 P.M. Eastern Time (11:00 A.M. Mexico City Time). To participate in the conference call, please dial: Domestic U.S.: 888-461-2024 or International: 719-457-2664. Participant code: 7962315. 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, the state of Paraná, 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 64 bottling facilities and serves more than 346 million consumers through close to 2,900,000 retailers with more than 120,000 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.

 

v v v

 

(6 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, including segment information. 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)

 

		2Q 14				% Rev				2Q 13				% Rev				Reported Δ%				Excluding M&A Effects Δ% (9)				YTD 14				% Rev				YTD 13				% Rev				Reported Δ%				Excluding M&A Effects Δ%(9)
Volume (million unit cases) (2)			845.6								796.7								6.1	%			-2.8	%			1,665.0								1,527.3								9.0	%			-1.5	%
Average price per unit case (2)			47.07								44.27								6.3	%			4.5	%			46.85								45.04								4.0	%			2.2	%
Net revenues			41,356								36,088								14.6	%							81,273								70,461								15.3	%
Other operating revenues			78								172								-54.7	%							139								391								-64.5	%
Total revenues (3)			41,434				100	%			36,260				100	%			14.3	%			3.2	%			81,412				100	%			70,852				100	%			14.9	%			2.6	%
Cost of goods sold			21,886				52.8	%			19,075				52.6	%			14.7	%							43,320				53.2	%			37,602				53.1	%			15.2	%
Gross profit			19,548				47.2	%			17,185				47.4	%			13.8	%			5.0	%			38,092				46.8	%			33,250				46.9	%			14.6	%			4.9	%
Operating expenses			13,404				32.4	%			12,197				33.6	%			9.9	%							26,865				33.0	%			23,870				33.7	%			12.5	%
Other operative expenses, net			302				0.7	%			(24	)			-0.1	%			-1358.3	%							360				0.4	%			227				0.3	%			58.6	%
Operative equity method (gain) loss in associates(4)(5)			100				0.2	%			(130	)			-0.4	%			-176.9	%							166				0.2	%			(148	)			-0.2	%			-212.2	%
Operating income (6)			5,742				13.9	%			5,142				14.2	%			11.7	%			6.6	%			10,701				13.1	%			9,301				13.1	%			15.1	%			7.7	%
Other non operative expenses, net			75				0.2	%			124				0.3	%			-39.7	%							57				0.1	%			180				0.3	%			-68.3	%
Non Operating equity method (gain) loss in associates(7)			(63	)			-0.2	%			(40	)			-0.1	%			56.1	%							(71	)			-0.1	%			(63	)			-0.1	%			12.3	%
Interest expense			1,416								675								109.8	%							2,852								1,192								139.3	%
Interest income			82								112								-26.8	%							318								217								46.5	%
Interest expense, net			1,334								563								136.9	%							2,534								975								159.9	%
Foreign exchange loss (gain)			(107	)							391								-127.4	%							(53	)							157								-133.8	%
Loss (gain) on monetary position in Inflationary subsidiries			404								166								143.4	%							538								202								1.7
Market value (gain) loss on ineffective portion of derivative instruments			(22	)							(33	)							-33.3	%							(161	)							14								-1250.0	%
Comprehensive financing result			1,609								1,087								48.0	%							2,858								1,348								112.0	%
Income before taxes			4,121								3,971								3.8	%							7,857								7,836								0.3	%
Income taxes			1,439								1,128								27.6	%							2,696								2,438								10.6	%
Consolidated net income			2,682								2,843								-5.7	%							5,161								5,398								-4.4	%
Net income attributable to equity holders of the Company			2,679				6.5	%			2,807				7.7	%			-4.6	%							5,076				6.2	%			5,280				7.5	%			-3.9	%
Non-controlling interest			3								36								-91.7	%							85								118								-28.0	%
Operating income (6)			5,742				13.9	%			5,142				14.2	%			11.7	%			6.6	%			10,701				13.1	%			9,301				13.1	%			15.1	%			7.7	%
Depreciation			1,704								1,513								12.6	%							3,318								2,948								12.6	%
Amortization and other operative non-cash charges			796								20								3880.0	%							1,191								321								271.0	%
Operative cash flow (6)(8)			8,242				19.9	%			6,675				18.4	%			23.5	%			17.4	%			15,210				18.7	%			12,570				17.7	%			21.0	%			13.2	%

 

(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. 16,805 million from our Mexican operation and Ps. 9,686 million from our Brazilian operation.

(4)

Includes equity method in Jugos del Valle, Coca-Cola Bottlers Philippines, Inc., Leao Alimentos and Estrella Azul, among others.

(5)

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.

(6)

The Operating income and Operative cash flow lines are presented as non-gaap measures for the convenience of the reader.

(7)

Includes equity method in PIASA, IEQSA, Beta San Miguel, IMER and KSP Participacoes.

(8)

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

(9)

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 betterrepresentation 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 June 2013, we integrated Grupo Yoli in our Mexican operation.

As of September 2013, we integrated Fluminense in our Brazilian operation.

As of November 2013, we integrated Spaipa in our Brazilian operation.

 

 

  

Consolidated Balance Sheet

Expressed in millions of Mexican pesos.

 

Assets		Jun-14				Dec-13
Current Assets
Cash, cash equivalents and marketable securities		Ps.	19,235			Ps.	15,306
Total accounts receivable			8,173				9,958
Inventories			8,972				9,130
Other current assets			7,819				8,837
Total current assets			44,199				43,231
Property, plant and equipment
Property, plant and equipment			86,041				86,961
Accumulated depreciation			(34,867	)			(35,176	)
Total property, plant and equipment, net			51,174				51,785
Other non-current assets (2)			123,290				121,649
Total Assets		Ps.	218,663			Ps.	216,665

 

Liabilities and Equity			Jun-14				Dec-13
Current Liabilities
Short-term bank loans and notes payable		Ps.	1,928			Ps.	3,586
Suppliers			15,921				16,220
Other current liabilities			16,643				12,592
Total Current Liabilities			34,492				32,398
Long-term bank loans and notes payable			58,338				56,875
Other long-term liabilities			11,927				10,239
Total Liabilities			104,757				99,512
Equity
Non-controlling interest			4,296				4,042
Total controlling interest			109,610				113,111
Total equity (1)			113,906				117,153
Total Liabilities and Equity		Ps.	218,663			Ps.	216,665

 

(1)

Includes the effect originated by using the state-run SICAD exchange rate of 10.60 bolivar per U.S. dollar as of June 30, 2014.

(2)

Includes the Rights to produce and distribute Coca-Cola trademark products, Goodwill and Investments in associates and joint ventures.

 

 

  

Mexico & Central America Division

Expressed in millions of Mexican pesos(1)

 

		2Q 14				% Rev				2Q 13				% Rev				Reported Δ%				Excluding M&A Effects Δ%(7)				YTD 14				% Rev				YTD 13				% Rev				Reported Δ%				Excluding M&A Effects Δ%(7)
Volume (million unit cases)			506.8								523.4								-3.2	%			-6.6	%			948.1								959.6								-1.2	%			-5.3	%
Average price per unit case			37.52								35.60								5.4	%			5.1	%			37.20								35.69								4.2	%			3.8	%
Net revenues			19,012								18,631								2.0	%							35,266								34,251								3.0	%
Other operating revenues			35								83								-57.8	%							41								164								-75.0	%
Total revenues (2)			19,047				100.0	%			18,714				100.0	%			1.8	%			-2.1	%			35,307				100.0	%			34,415				100.0	%			2.6	%			-2.1	%
Cost of goods sold			9,198				48.3	%			9,407				50.3	%			-2.2	%							17,354				49.2	%			17,453				50.7	%			-0.6	%
Gross profit			9,849				51.7	%			9,307				49.7	%			5.8	%			2.2	%			17,953				50.8	%			16,962				49.3	%			5.8	%			1.6	%
Operating expenses			6,232				32.7	%			6,068				32.4	%			2.7	%							12,002				34.0	%			11,402				33.1	%			5.3	%
Other operative expenses, net			112				0.6	%			15				0.1	%			646.7	%							142				0.4	%			87				0.3	%			63.2	%
Operative equity method (gain) loss in associates (3)(4)			135				0.7	%			(128	)			-0.7	%			-205.5	%							229				0.6	%			(135	)			-0.4	%			-269.6	%
Operating income (5)			3,370				17.7	%			3,352				17.9	%			0.5	%			-1.2	%			5,580				15.8	%			5,608				16.3	%			-0.5	%			-2.2	%
Depreciation, amortization & other operative non-cash charges			1,310				6.9	%			818				4.4	%			60.1	%							2,377				6.7	%			1,643				4.8	%			44.7	%
Operative cash flow (5)(6)			4,680				24.6	%			4,170				22.3	%			12.2	%			10.1	%			7,957				22.5	%			7,251				21.1	%			9.7	%			7.3	%

 

(1)

Except volume and average price per unit case figures.

(2)

Includes total revenues of Ps. 16,805 million from our Mexican operation.

(3)

Includes equity method in Jugos del Valle, Coca-Cola Bottlers Philippines, Inc. 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)

Operative cash flow = Operating income + Depreciation, amortization & other operative non-cash charges.

(7)

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 June 2013, we integrated Grupo Yoli in our Mexican operation.

 

South America Division

Expressed in millions of Mexican pesos(1)

 

		2Q 14				% Rev				2Q 13				% Rev				Δ%				Excluding M&A Effects Δ%(7)				YTD 14				% Rev				YTD 13				% Rev				Δ%				Excluding M&A Effects Δ%(7)
Volume (million unit cases) (2)			338.9								273.3								24.0	%			4.4	%			716.9								567.7								26.3	%			5.0	%
Average price per unit case (2)			61.35								60.89								0.8	%			5.0	%			59.62								60.85								-2.0	%			-1.8	%
Net revenues			22,343								17,457								28.0	%							46,008								36,210								27.1	%
Other operating revenues			43								89								-51.7	%							97								227								-57.3	%
Total revenues (3)			22,386				100.0	%			17,546				100.0	%			27.6	%			8.9	%			46,105				100.0	%			36,437				100.0	%			26.5	%			6.9	%
Cost of goods sold			12,688				56.7	%			9,668				55.1	%			31.2	%							25,966				56.3	%			20,149				55.3	%			28.9	%
Gross profit			9,698				43.3	%			7,878				44.9	%			23.1	%			8.4	%			20,139				43.7	%			16,288				44.7	%			23.6	%			8.3	%
Operating expenses			7,171				32.0	%			6,129				34.9	%			17.0	%							14,865				32.2	%			12,467				34.2	%			19.2	%
Other operative expenses, net			190				0.8	%			(39	)			-0.2	%			-587.2	%							217				0.5	%			141				0.4	%			54	%
Operative equity method (gain) loss in associates (4)			(36	)			-0.2	%			(2	)			0.0	%			1700.0	%							(63	)			-0.1	%			(13	)			0.0	%			384.6	%
Operating income (5)			2,373				10.6	%			1,790				10.2	%			32.6	%			21.1	%			5,120				11.1	%			3,693				10.1	%			38.6	%			22.7	%
Depreciation, amortization & other operative non-cash charges			1,189				5.3	%			715				4.1	%			66.3	%							2,133				4.6	%			1,626				4.5	%			31.2	%
Operative cash flow (5)(6)			3,562				15.9	%			2,505				14.3	%			42.2	%			29.5	%			7,253				15.7	%			5,319				14.6	%			36.4	%			21.3	%

 

(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. 9,686 million from our Brazilian operation.

(4)

Includes equity method in Leao Alimentos, 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)

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 in our Brazilian operation.

As of November 2013, we integrated Spaipa in our Brazilian operation.

 

 

  

SELECTED INFORMATION

For the three months ended June 30, 2014 and 2013

Expressed in millions of Mexican pesos.

 

				2Q 14						2Q 13
Capex				2,415.9		Capex				2,347.3
Depreciation				1,704.0		Depreciation				1,513.0
Amortization & Other operative non-cash charges				796.0		Amortization & Other operative non-cash charges				20.0

 

VOLUME
Expressed in million unit cases
	2Q 14						2Q 13
	Sparkling	Water (1)	Bulk Water (2)	Still	Total		Sparkling	Water (1)	Bulk Water (2)	Still	Total
Mexico	333.3	27.7	80.3	23.1	464.4		342.5	28.2	87.4	25.8	483.9
Central America	35.6	2.4	0.1	4.3	42.4		33.1	2.1	0.1	4.2	39.5
Mexico & Central America	368.9	30.1	80.4	27.4	506.8		375.6	30.3	87.5	30.0	523.4
Colombia	53.5	5.9	6.8	7.4	73.5		47.9	5.6	7.3	5.2	66.0
Venezuela	49.9	2.7	0.2	4.4	57.2		47.1	2.5	0.7	3.3	53.6
Argentina	41.7	3.5	0.1	2.1	47.4		42.8	3.3	0.1	2.2	48.4
Brazil	143.4	7.9	1.0	8.4	160.7		94.1	5.0	0.6	5.6	105.3
South America	288.5	19.9	8.2	22.2	338.9		231.9	16.4	8.7	16.3	273.3
Total	657.4	50.0	88.6	49.6	845.6		607.5	46.7	96.2	46.3	796.7

 

⁽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

 

ORGANIC VOLUME ⁽¹⁾

Expressed in million unit cases

 

	2Q 14						2Q 13
	Sparkling	Water (2)	Bulk Water (3)	Still	Total		Sparkling	Water (2)	Bulk Water (3)	Still	Total
Mexico Organic	318.5	25.4	80.2	22.4	446.7		342.5	28.2	87.4	25.8	483.9
Mexico & Central America Organic	354.2	27.8	80.3	26.7	489.0		375.6	30.3	87.5	30.0	523.4
Brazil Organic	94.9	5.7	0.7	5.7	107.0		94.1	5.0	0.6	5.6	105.3
South America Organic	240.0	17.8	7.9	19.6	285.3		231.9	16.4	8.7	16.3	273.3
Total Organic	594.2	45.6	88.2	46.3	774.3		607.5	46.7	96.2	46.3	796.7

 

⁽¹⁾ Excludes volume from Yoli for the months of April, 2014 and May, 2014 and Fluminense and Spaipa for 2Q'14

⁽²⁾ Excludes water presentations larger than 5.0 Lt ; includes flavored water

⁽³⁾ Bulk Water = Still bottled water in 5.0, 19.0 and 20.0 - liter packaging presentations; includes flavored water

 

 

 

SELECTED INFORMATION

For the six months ended June 30, 2014 and 2013

Expressed in millions of Mexican pesos.

 

				YTD 14						YTD 13
Capex				4,048.0		Capex				4,591.3
Depreciation				3,318.0		Depreciation				2,948.0
Amortization & Other operative non-cash charges				1,191.0		Amortization & Other operative non-cash charges				321.0

 

VOLUME

Expressed in million unit cases

 

	YTD 14						YTD 13
	Sparkling	Water (1)	Bulk Water (2)	Still	Total		Sparkling	Water (1)	Bulk Water (2)	Still	Total
Mexico	618.4	52.4	151.3	45.3	867.4		625.7	49.5	159.6	47.7	882.5
Central America	67.6	4.7	0.2	8.2	80.7		64.4	4.3	0.2	8.2	77.1
Mexico & Central America	686.0	57.1	151.5	53.5	948.1		690.1	53.8	159.8	55.9	959.6
Colombia	103.5	11.3	14.4	14.1	143.1		95.1	11.0	14.7	9.6	130.4
Venezuela	100.7	6.3	1.1	9.4	117.5		94.3	5.2	1.4	7.2	108.1
Argentina	92.3	7.9	0.2	4.6	105.0		94.4	7.5	0.2	4.5	106.6
Brazil	309.3	20.7	2.6	18.6	351.2		197.8	11.5	1.6	11.7	222.6
South America	605.7	46.2	18.2	46.7	716.9		481.6	35.2	17.9	33.0	567.7
Total	1,291.7	103.3	169.7	100.3	1,665.0		1,171.7	89.0	177.7	88.9	1,527.3

 

⁽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

 

 

ORGANIC VOLUME ⁽¹⁾

Expressed in million unit cases

 

	YTD 14						YTD 13
	Sparkling	Water (2)	Bulk Water (3)	Still	Total		Sparkling	Water (2)	Bulk Water (3)	Still	Total
Mexico Organic	585.6	47.4	151.1	43.6	827.7		625.7	49.5	159.6	47.7	882.5
Mexico & Central America Organic	653.2	52.1	151.3	51.8	908.4		690.1	53.8	159.8	55.9	959.6
Brazil Organic	201.4	15.0	1.7	12.5	230.6		197.8	11.5	1.6	11.7	222.6
South America Organic	497.8	40.5	17.4	40.6	596.3		481.6	35.2	17.9	33.0	567.7
Total Organic	1,151.0	92.6	168.7	92.4	1,504.7		1,171.7	89.0	177.7	88.9	1,527.3

 

⁽¹⁾ Excludes volume from Yoli as of January, 2014 through May, 2014 and Fluminense and Spaipa as of January, 2014 through June, 2014

⁽²⁾ Excludes water presentations larger than 5.0 Lt ; includes flavored water

⁽³⁾ Bulk Water = Still bottled water in 5.0, 19.0 and 20.0 - liter packaging presentations; includes flavored water

 

 

 

  

June 2014
Macroeconomic Information
				Inflation (1)
				LTM	2Q 2014		YTD
		Mexico		3.75%	-0.33%		1.09%
		Colombia		2.79%	1.04%		2.57%
		Venezuela(2)		62.14%	17.87%		29.75%
		Brazil		6.52%	1.54%		3.75%
		Argentina		21.88%	4.58%		15.01%
		(1) Source: inflation is published by the Central Bank of each country.
		(2) Inflation based on unofficial publications as of July 22, 2014.
Average Exchange Rates for each Period
		Quarterly Exchange Rate (local currency per USD)					YTD Exchange Rate (local currency per USD)
		2Q 14		2Q 13	Δ%		YTD 14	YTD 13	Δ%
Mexico		13.0030		12.4684	4.3%		13.1193	12.5639	4.4%
Guatemala		7.7635		7.8004	-0.5%		7.7722	7.8209	-0.6%
Nicaragua		25.7967		24.5682	5.0%		25.6416	24.4205	5.0%
Costa Rica		557.3435		504.5097	10.5%		545.3068	505.2865	7.9%
Panama		1.0000		1.0000	0.0%		1.0000	1.0000	0.0%
Colombia		1,914.3174		1,863.1919	2.7%		1,961.1878	1,826.8259	7.4%
Venezuela		10.0778		6.3000	60.0%		8.9770	5.8238	54.1%
Brazil		2.2297		2.0700	7.7%		2.2969	2.0329	13.0%
Argentina		8.0565		5.2417	53.7%		7.8415	5.1281	52.9%
End of Period Exchange Rates
		Exchange Rate (local currency per USD)					Exchange Rate (local currency per USD)
		June 14		June 13	Δ%		Mar 14	Mar 13	Δ%
Mexico		13.0323		13.0235	0.1%		13.0837	12.3546	5.9%
Guatemala		7.7786		7.8330	-0.7%		7.7278	7.7774	-0.6%
Nicaragua		25.9521		24.7163	5.0%		25.6384	24.4175	5.0%
Costa Rica		548.6600		504.5300	8.7%		553.6300	504.6500	9.7%
Panama		1.0000		1.0000	0.0%		1.0000	1.0000	0.0%
Colombia		1,881.1900		1,929.0000	-2.5%		1,965.3200	1,832.2000	7.3%
Venezuela		10.6000		6.3000	68.3%		10.7000	6.3000	69.8%
Brazil		2.2025		2.2156	-0.6%		2.2630	2.0138	12.4%
Argentina		8.1330		5.3880	50.9%		8.0020	5.1220	56.2%