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 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:  October 28, 2014

 

 

 

 

 

FEMSA Delivers Double Digit

Operating Income Growth in 3Q14

 

Monterrey, Mexico, October 28, 2014 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the third quarter of 2014.

 

Third Quarter 2014 Highlights:

 

·

FEMSA consolidated total revenues increased 13.2% and income from operations grew 15.8% compared to the third quarter of 2013, reflecting growth at FEMSA Comercio and Coca-Cola FEMSA. On an organic basis1 total revenues and income from operations increased 7.9% and 10.8%, respectively.

 

·

Coca-Cola FEMSA total revenues increased 11.4% and income from operations increased 15.1% compared to the third quarter of 2013, reflecting the integration of Fluminense, and Spaipa combined with revenue growth in most markets. On an organic basis1 total revenues and income from operations grew 2.5% and 7.9%, respectively.

 

·

FEMSA Comercio achieved total revenues growth of 12.7% and income from operations growth of 17.6% compared to the third quarter of 2013, driven by 1,185 net new store openings in the last twelve months and 3.1% growth in same-store sales. On an organic basis1 total revenues and income from operations grew 12.2% and 18.0%, respectively.

 

Carlos Salazar Lomelín, FEMSA CEO, commented: “During the third quarter, we saw improving trends in certain operations and certain geographies, but there remain some headwinds ahead of us in the short term.  We are encouraged, for example, by the moderate improvement in comparable sales at FEMSA Comercio, but they are still below the growth levels that we aspire to generate.  Volume performance at Coca-Cola FEMSA Mexico was strong in the face of significant tax-driven price increases carried out earlier in the year, but it belies the general softness still present in the Mexican consumer environment.  And we continue to face challenging demand dynamics in some markets like Brazil.

 

Having said that, as we approach the end of the year, we are optimistic that the favorable macro data that we are seeing in Mexico will eventually make its way to the pocket of our consumers, and that once we turn the page on 2014, we will cycle the pressures brought about by incremental taxation.  And together with the hard work and continued excellent execution delivered daily by our more than 200,000 colleagues across the 10 countries where we operate, we have every confidence that we are moving in the right direction.”

 

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

 

 

 

 

 

FEMSA Consolidated

 

Total revenues increased 13.2% compared to 3Q13 to Ps. 72.391 billion in 3Q14 driven by Coca-Cola FEMSA and FEMSA Comercio. On an organic basis¹ total revenues increased 7.9% compared to 3Q13.

 

For the first nine months of 2014, consolidated total revenues increased 13.1% compared to the same period in 2013 to Ps. 208.782 billion driven by Coca-Cola FEMSA and FEMSA Comercio. On an organic basis¹, total revenues for the first nine months of 2014 increased 5.8% compared to the same period in 2013.

 

Gross profit increased 13.4% compared to 3Q13 to Ps. 30.654 billion in 3Q14. Gross margin remained stable compared to the same period in 2013 at 42.3% of total revenues.

 

For the first nine months of 2014, gross profit increased 12.5% compared to the same period in 2013 to Ps. 87.543 billion. Gross margin decreased 20 basis points compared to the same period in 2013 to 41.9% of total revenues reflecting a gross margin contraction at Coca-Cola FEMSA and the effect of the faster growth of lower-margin FEMSA Comercio, which tends to compress FEMSA’s consolidated gross margins over time.

 

Income from operations increased 15.8% compared to 3Q13 to Ps. 8.323 billion in 3Q14. On an organic basis¹ income from operations increased 10.8% compared to the same period in 2013. Consolidated operating margin increased by 30 basis points compared to 3Q13 to 11.5% of total revenues in 3Q14, driven by operating margin expansions at both Coca-Cola FEMSA and FEMSA Comercio.

 

For the first nine months of 2014, income from operations increased 12.8% compared to the same period in 2013 to Ps. 22.362 billion. On an organic basis¹ income from operations increased 7.5%. Our consolidated operating margin year-to-date remained stable at 10.7% as a percentage of total revenues as compared to the same period of 2013.

 

Our effective income tax rate was 19.9% in 3Q14 compared to 32.6% in 3Q13 largely reflecting a one-time benefit resulting from the settlement of certain contingent tax liabilities at Coca-Cola FEMSA under the tax amnesty program offered by the Brazilian tax authorities. For the first nine months of 2014, our effective tax rate was in line with our expected medium-term range of low 30s.

 

Net consolidated income increased 10.0% compared to 3Q13 to Ps. 6.717 billion in 3Q14, mainly as a result of the growth in our income from operations combined with a lower income tax rate that compensated for higher financing expenses related to bonds issued recently by Coca-Cola FEMSA.

 

For the first nine months of 2014, net consolidated income decreased 1.2% to Ps. 15.037 billion compared to the same period of 2013, reflecting higher financing expenses related to bonds issued recently by Coca-Cola FEMSA and FEMSA, which was partially compensated by the growth in our income from operations.

 

Net majority income for 3Q14 was Ps. 1.34 per FEMSA Unit². Net majority income per FEMSA ADS was US$ 1.00 for 3Q14. For the first nine months of 2014, net majority income per FEMSA Unit was Ps. 2.90 (US$ 2.16 per ADS).

 

Capital expenditures amounted to Ps. 4.857 billion in 3Q14, reflecting lower investments at Coca-Cola FEMSA and FEMSA Comercio.

 

Our consolidated balance sheet as of September 30, 2014 recorded a cash balance of Ps. 41.751 billion (US$ 3.109 billion), an increase of Ps. 14.366 billion (US$ 1.070 million) compared to December 31, 2013. Short-term debt was Ps. 1.879 billion (US$ 139.9 million), while long-term debt was Ps. 75.659 billion (US$ 5.635 billion). Our consolidated net debt balance was Ps. 35.787 billion (US$ 2.665 billion).

 

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

 

 

 

 

 

 

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 12.7% compared to 3Q13 to Ps. 28.545 billion in 3Q14, mainly driven by the opening of 191 net new stores in the quarter reaching 1,185 total net new store openings for the last twelve months. On an organic basis³, total revenues increased 12.2% compared to 3Q13. As of September 30, 2014, FEMSA Comercio had a total of 12,395 convenience stores. Same-store sales increased an average of 3.1% for the third quarter of 2014 over 3Q13, reflecting a 3.3% increase in average customer ticket that offset a 0.2% decrease in store traffic.

 

For the first nine months of 2014, total revenues increased 12.5% compared to the same period in 2013, to Ps. 80.812 billion. On an organic basis³, total revenues for the first nine months of 2014 increased 10.6% compared to the same period in 2013. FEMSA Comercio’s same-store sales increased an average of 2.4% compared to the same period in 2013, driven by a 2.6% increase in average customer ticket that offset a 0.2% decrease in store traffic.

 

Gross profit increased by 15.4% in 3Q14 compared to 3Q13, resulting in a 90 basis point gross margin expansion to 36.0% of total revenues. This increase was largely driven by increased promotional activity in certain categories during the summer months, as certain suppliers brought forward some resources that would historically have been deployed later in the year. The increase therefore reflects an effective collaboration and execution with our key supplier partners. For the first nine months of 2014, gross margin expanded by 40 basis points compared to the same period in 2013, to 34.8% of total revenues.

 

Income from operations increased 17.6% over 3Q13 to Ps. 2.339 billion in 3Q14. On an organic basis³, income from operations increased 18.0% in 3Q14 compared to 3Q13. Operating expenses increased 14.8% in 3Q14 to Ps. 7.930 billion, reflecting the strong growth in new stores, the continued rollout of new initiatives, as well as expenses related to the incorporation of FEMSA Comercio’s new quick-service-restaurant operation. Operating margin expanded 30 basis points compared to 3Q13, to 8.2% of total revenues in 3Q14.

 

For the first nine months of 2014, income from operations increased 12.0% compared to the same period in 2013 to Ps. 5.500 billion, resulting in an operating margin of 6.8%, which remained stable when compared to the same period in the prior year. On an organic basis³, income from operations increased 11.7% in 3Q14 compared to the same period in 2013.

 

³ Excludes non-comparable results from FEMSA Comercio’s acquisitions over the last twelve months.

 

 

 

 

 

 

CONFERENCE CALL INFORMATION:

 

Our Third Quarter of 2014 Conference Call will be held on: Tuesday, October 28, 2014, 12:00 PM Eastern Time (10:00 AM Mexico City Time). To participate in the conference call, please dial: Domestic US: (888) 481-2877; International: (719) 325-2484; Conference ID: 9266507. The conference call will be webcast live through streaming audio. For details please visit www.femsa.com/investor.

 

If you are unable to participate live, the conference call audio will be available on http://ir.FEMSA.com/results.cfm.

 

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 in this report 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, 2014, which was 13.4270 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 nine months of:
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Total revenues			72,391				100.0				63,977				100.0				13.2				7.9				208,782				100.0				184,617				100.0				13.1				5.8
Cost of sales			41,737				57.7				36,940				57.7				13.0								121,239				58.1				106,806				57.9				13.5
Gross profit			30,654				42.3				27,037				42.3				13.4								87,543				41.9				77,811				42.1				12.5
Administrative expenses			2,853				3.9				2,550				4.0				11.9								8,273				4.0				7,289				3.9				13.5
Selling expenses			19,102				26.4				17,273				27.1				10.6								55,930				26.7				50,538				27.4				10.7
Other Operating expenses (income), net (1)			376				0.5				27				-				N.A.								978				0.5				168				-				N.A.
Income from operations(2)			8,323				11.5				7,187				11.2				15.8				10.8				22,362				10.7				19,816				10.7				12.8				7.5
Other Non-Operating expenses (income)			(263	)							(79	)							N.A.								(210	)							42								N.A.
Interest expense			1,787								910								96.4								5,162								2,523								N.A.
Interest income			228								427								(46.6	)							745								811								(8.1	)
Foreign exchange loss (gain)			356								163								N.A.								350								289								21.1
Other financial expenses (income), net.			282								(74	)							N.A.								681								201								N.A.
Financing expenses, net			2,197								572								N.A.								5,448								2,202								N.A.
Income before income tax and Participation in Associates results			6,389								6,694								(4.6	)							17,124								17,572								(2.5	)
Income tax			1,274								2,182								(41.6	)							5,060								5,670								(10.8	)
Participation in associates results(3)			1,602								1,594								0.5								2,973								3,315								(10.3	)
Net consolidated income			6,717								6,106								10.0								15,037								15,217								(1.2	)
Net majority income			4,806								4,478								7.3								10,390								10,750								(3.3	)
Net minority income			1,911								1,628								17.4								4,647								4,467								4.0
		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			8,323				11.5				7,187				11.2				15.8				10.8				22,362				10.7				19,816				10.7				12.8				7.5
Depreciation			2,331				3.2				2,161				3.4				7.9								7,077				3.4				6,269				3.4				12.9
Amortization & other non-cash charges			758				1.1				298				0.5				N.A.								2,151				1.0				859				0.5				N.A.
Operative Cash Flow (EBITDA)			11,412				15.8				9,646				15.1				18.3				13.8				31,590				15.1				26,944				14.6				17.2				11.8
CAPEX			4,857								5,360								(9.4	)							11,969								12,269								(2.4	)
Financial Ratios		2014								2013								Var. p.p.
Liquidity(4)			1.56								1.51								0.06
Interest coverage(5)			7.32								19.97								(12.65	)
Leverage(6)			0.63								0.61								0.01
Capitalization(7)			25.59	%							25.79	%							(0.20	)

 

^(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		Sep-14				Dec-13				% Var.
Cash and cash equivalents			41,751				27,385				52.5
Accounts receivable			13,012				13,641				(4.6	)
Inventories			16,455				18,289				(10.0	)
Other current assets			12,789				14,254				(10.3	)
Total current assets			84,007				73,569				14.2
Investments in shares			94,831				98,330				(3.6	)
Property, plant and equipment, net			75,427				73,955				2.0
Intangible assets (1)			102,650				103,293				(0.6	)
Other assets			12,570				10,045				25.1
TOTAL ASSETS			369,485				359,192				2.9
LIABILITIES & STOCKHOLDERS´ EQUITY
Bank loans			335				529				(36.7	)
Current maturities of long-term debt			1,544				3,298				(53.2	)
Interest payable			1,004				409				N.A.
Operating liabilities			50,926				44,633				14.1
Total current liabilities			53,809				48,869				10.1
Long-term debt (2)			75,659				72,185				4.8
Labor liabilities			4,099				4,074				0.6
Other liabilities			8,583				11,514				(25.5	)
Total liabilities			142,150				136,642				4.0
Total stockholders’ equity			227,335				222,550				2.2
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			369,485				359,192				2.9

 

		September 30, 2014
DEBT MIX (2)		% of Total				Average Rate
Denominated in:
Mexican pesos			43.9	%			5.6	%
Dollars			20.8	%			6.2	%
Colombian pesos			1.0	%			5.6	%
Argentine pesos			1.2	%			26.6	%
Brazilian Reais			33.0	%			10.5	%
Total debt			100	%			7.6	%
Fixed rate(2)			71.1	%
Variable rate(2)			28.9	%

 

% of Total Debt		2014				2015				2016				2017				2018				2019+
DEBT MATURITY PROFILE			0.9	%			1.7	%			6.3	%			3.7	%			22.2	%			65.2	%

 

⁽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 nine months of:
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Total revenues			41,781				100.0				37,494				100.0				11.4				2.5				123,114				100.0				109,737				100.0				12.2				1.2
Cost of sales			22,196				53.1				19,919				53.1				11.4								65,478				53.2				58,225				53.1				12.5
Gross profit			19,585				46.9				17,575				46.9				11.4								57,636				46.8				51,512				46.9				11.9
Administrative expenses			1,811				4.3				1,647				4.4				10.0								5,369				4.4				4,709				4.3				14.0
Selling expenses			11,629				27.9				10,859				29.0				7.1								34,906				28.3				32,208				29.3				8.4
Other Operating expenses (income), net			320				0.8				6				-				N.A.								845				0.7				95				0.1				N.A.
Income from operations			5,825				13.9				5,063				13.5				15.1				7.9				16,516				13.4				14,500				13.2				13.9				6.7
Depreciation			1,520				3.6				1,562				4.2				(2.7	)							4,836				3.9				4,555				4.2				6.2
Amortization & other non-cash charges			663				1.7				186				0.5				N.A.								1,851				1.5				521				0.4				N.A.
Operative Cash Flow			8,008				19.2				6,811				18.2				17.6				11.1				23,203				18.8				19,576				17.8				18.5				11.3
CAPEX			2,947								3,458								(14.8	)							6,994								8,092								(13.6	)
Sales volumes
(Millions of unit cases)
Mexico and Central America			497.0				58.1				494.3				62.2				0.5				0.5				1,445.1				57.3				1,454.0				62.6				(0.6	)			(3.3	)
South America			191.9				22.4				182.7				23.0				5.0				5.0				557.7				22.1				527.8				22.7				5.7				5.7
Brazil			166.5				19.5				118.4				14.9				40.6				(5.5	)			517.7				20.5				340.9				14.7				51.8				3.6
Total			855.4				100.0				795.4				100.0				7.6				0.7				2,520.5				79.4				2,322.7				85.3				8.5				(0.7	)

 

^(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 nine months of:
		2014				% of rev.				2013				% of rev.				% Var.				% Org (A)				2014				% of rev.				2013				% of rev.				% Var.				% Org (A)
Total revenues			28,545				100.0				25,337				100.0				12.7				12.2				80,812				100.0				71,848				100.0				12.5				10.6
Cost of sales			18,276				64.0				16,442				64.9				11.2								52,717				65.2				47,150				65.6				11.8
Gross profit			10,269				36.0				8,895				35.1				15.4								28,095				34.8				24,698				34.4				13.8
Administrative expenses			500				1.8				448				1.8				11.6								1,526				1.9				1,410				2.0				8.2
Selling expenses			7,371				25.8				6,432				25.3				14.6								20,941				25.9				18,305				25.5				14.4
Other Operating expenses (income), net			59				0.2				26				0.1				N.A.								128				0.2				71				0.1				80.3
Income from operations			2,339				8.2				1,989				7.9				17.6				18.0				5,500				6.8				4,912				6.8				12.0				11.7
Depreciation			703				2.5				575				2.3				22.3								2,049				2.5				1,645				2.3				24.6
Amortization & other non-cash charges			82				0.2				93				0.3				(11.8	)							227				0.3				261				0.4				(13.0	)
Operative Cash Flow			3,124				10.9				2,657				10.5				17.6				17.8				7,776				9.6				6,818				9.5				14.1				13.5
CAPEX			1,386								1,720								(19.4	)							3,547				-				3,765				-				(5.8	)
Information of OXXO Stores
Total stores			191								195								(2.1	)							12,395								11,210								10.6
Net new convenience stores:
vs. September prior year			1,185								1,043								13.6
vs. December prior year			674								609								10.7
Same store data: (1)
Sales (thousands of pesos)			699.6								678.5								3.1								679.5								663.3								2.4
Traffic (thousands of transactions)			24.7								24.8								(0.2	)							24.2								24.3								(0.2	)
Ticket (pesos)			28.3								27.4								3.3								28.0								27.3								2.6

 

⁽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-14								Sep-13
		3Q 2014				LTM(1)  Sep-14				Per USD				Per Mx. Peso				Per USD				Per Mx. Peso
Mexico			1.08	%			4.22	%			13.45				1.0000				13.01				1.0000
Colombia			0.49	%			2.86	%			2,028.48				0.0066				1,914.65				0.0068
Venezuela			11.85	%			63.44	%			12.00				1.1212				6.30				2.0654
Brazil			0.83	%			6.75	%			2.45				5.4892				2.23				5.8349
Argentina			4.20	%			23.75	%			8.43				1.5960				5.79				2.2461
Euro Zone			-0.13	%			0.29	%			0.79				17.1123				0.73				17.7523

 

⁽¹⁾ LTM = Last twelve months

 

 

 

 

		2014 THIRD - QUARTER AND FIRST NINE MONTHS RESULTS
					Third Quarter						Excluding M&A		YTD						Excluding M&A
					2014		2013		Reported Δ%		Effects Δ%(5)		2014		2013		Reported Δ%		Effects Δ%(5)
		Total Revenues			41,781		37,494		11.4	%	2.5	%	123,114		109,737		12.2	%	1.2	%
		Gross Profit			19,585		17,575		11.4	%	4.5	%	57,636		51,512		11.9	%	3.3	%
		Operating Income			5,825		5,063		15.1	%	7.9	%	16,516		14,500		13.9	%	6.7	%
		Net Income Attributable to equity holders of the company			3,343		2,954		13.2	%			8,415		8,292		1.5	%
		Earnings per Share(1)			1.61		1.43
		Operative cash flow(2)			8,008		6,811		17.6	%	11.1	%	23,203		19,576		18.5	%	11.3	%
					LTM 3Q 2014		FY 2013		Δ%
		Net Debt (3)			39,953		45,155		-11.5	%
		Net Debt / Operative cash flow(3)			1.26		1.58
		Operative cash flow/ Interest Expense, net(3)			6.12		10.64
		Capitalization (4)			35.1	%	34.7	%
		Expressed in millions of Mexican pesos.
		(1) Quarterly earnings / outstanding shares as of the end of period. Outstanding shares as of 3Q’13 were 2,072.9 million. Outstanding shares as of 3Q’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. 41,781 million in the third quarter of 2014, an increase of 11.4% as compared to the third quarter of 2013. On a currency neutral basis and excluding the non-comparable effect of the integration of Companhia Fluminense de Refrigerantes (“Fluminense”) and Spaipa S.A. Industria Brasileira de Bebidas (“Spaipa”) in our Brazilian operation, total revenues grew 21.3%.
			Reported operating income reached Ps. 5,825 million in the third quarter of 2014, an increase of 15.1% as compared to the same period of the previous year, resulting in an operating margin of 13.9%.
			Reported operative cash flow grew 17.6% to Ps. 8,008 million in the third quarter of 2014, as compared to the same period in 2013. Our reported operative cash flow margin expanded 100 basis points to 19.2%. Excluding the recently integrated territories in Brazil, operating cash flow grew 11.1% resulting in a margin expansion of 150 basis points to reach 19.7%.
			Reported consolidated net controlling interest income grew 13.2% to Ps. 3,343 million in the third quarter of 2014, resulting in earnings per share of Ps. 1.61.
		Mexico City October 22, 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 third quarter of 2014.
		“As we enter the final stretch of the year, we continue to build positive momentum in our operations. This quarter, our operators delivered solid bottom-line growth, despite the many challenges we face across our markets. In Mexico, superior point of sale execution, hard work, and packaging and brand innovation continue to yield encouraging results. Importantly, at the beginning of September, we launched Coca-Cola Life, a mid-calorie option naturally sweetened with Stevia and sugar, refreshing the Coke category in Mexico with benchmark results for the system. Colombia and Central America continue to accelerate volume growth in their operations, while our revenue management initiatives, coupled with the synergies captured from our recent integrations, have enabled us to improve the profitability of Brazil. Argentina and Venezuela delivered positive results, despite a difficult macroeconomic and operating environment. Our implementation of an improved route-to-market, an efficient supply chain, and a renewed portfolio underscore our long-term commitment to develop our Philippine operation to capture the potential that we envision together with our partner, The Coca-Cola Company, in that region. We look forward to 2015, recognizing that we have the right team to win in the marketplace, delivering sustained economic, social, and environmental value for all of our stakeholders,” 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 third quarter and first nine months results of 2014 was 12.00 bolivars per U.S. dollar as per the auction held on September 25, 2014.

 

Our reported total revenues increased 11.4% to Ps. 41,781 million in the third quarter of 2014, compared to the third quarter of 2013, driven by the integration of Fluminense and Spaipa in our Brazilian territories⁽¹⁾ and revenue growth in our Mexican, Brazilian, Colombian, and Central American operations. Excluding the recently integrated territories in Brazil,⁽¹⁾ total revenues increased 2.5%. On a currency neutral basis and excluding the new franchises in Brazil,⁽¹⁾ total revenues grew 21.3%, driven by average price per unit case growth in most of our territories and volume growth in Colombia, Central America and Venezuela.

 

Reported total sales volume increased 7.5% to 855.4 million unit cases in the third quarter of 2014 as compared to the same period in 2013. Excluding the integration of Fluminense and Spaipa in Brazil,⁽¹⁾ volumes increased 0.7% to 800.8 million unit cases. On the same basis, our water portfolio, including bulk water, grew 2.6%, mainly driven by 2% growth in brand Ciel in Mexico. Our sparkling and still beverage categories remained flat.

 

Our reported gross profit increased 11.4% to Ps. 19,585 million in the third 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 most of the currencies in our South America division and the Mexican peso⁽²⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin remained flat at 46.9% in the third quarter of 2014.

 

Our reported operating income increased 15.1% to Ps. 5,825 million in the third quarter of 2014 and our reported operating margin was 13.9%. Excluding the integration of the new territories in Brazil,⁽¹⁾ operating income increased 7.9%, reaching Ps. 5,464 million and representing an operating margin of 14.2%. Excluding the non-comparable effect of Fluminense and Spaipa⁽¹⁾ operating expenses decreased as a percentage of revenues in the majority of our territories.

 

During the third quarter of 2014, the other operative expenses, net line recorded an expense of Ps. 103 million, mainly due to restructuring charges in our Mexican operation and operative currency fluctuation effects in most of our subsidiaries.

 

The share of the profits of associates and joint ventures line recorded a loss of Ps. 217 million in the third 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 a gain in the participation of our non-carbonated beverage joint-ventures in Brazil.

 

Reported operative cash flow grew 17.6% to Ps. 8,008 million in the third quarter of 2014 as compared to the same period in 2013. Our reported operative cash flow margin expanded 100 basis points to reach 19.2% in the third quarter of 2014. Excluding the recently integrated territories in Brazil, operating cash flow margin expanded 150 basis points to 19.7%.

 

Our comprehensive financing result in the third quarter of 2014 recorded an expense of Ps. 2,046 million as compared to an expense of Ps. 457 million in the same period of 2013. The financing of the most recent acquisitions in Brazil generated an increase in interest expenses due to a larger debt position and higher interest rates related to the debt balance swapped to Brazilian reals. In addition, during the quarter we registered a foreign exchange loss as a result of the quarterly depreciation of the Mexican peso⁽²⁾ as applied to our US dollar-denominated net debt position and a loss on the monetary position of Venezuela generated by a larger monetary asset position.

 

During the third quarter of 2014, income tax, as a percentage of income before taxes, was 14.2% as compared to 34.7% in the same period of 2013. The lower effective tax rate registered during the third quarter of 2014 is related to a one-time benefit resulting from the settlement of certain contingent tax liabilities under the tax amnesty program offered by the Brazilian tax authorities.

 

The benefit resulting from the settlement of this tax contingency was recorded as (i) a gain in the other non-operative expenses line due to the cancellation of a previously recorded provision and (ii) a reduction of income taxes.

 

Our reported consolidated net controlling interest grew 13.2% to Ps. 3,343 million in the third quarter of 2014. Earnings per share (EPS) in the third quarter of 2014 were Ps. 1.61 (Ps. 16.12 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 results for the months of July, 2014 and August, 2014, and Spaipa’s results for the months of July, 2014 through September, 2014.

(2)

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

 

 

 

As of September 30, 2014, we had a cash balance of Ps. 21,597 million, including US$513 million denominated in U.S. dollars, an increase of Ps. 6,291 million compared to December 31, 2013. This difference was mainly driven by cash generated by our operations.

 

As of September 30, 2014, total short-term debt was Ps. 1,636 million and long-term debt was Ps. 59,914 million. Total debt increased by Ps. 1,089 million, compared to year end 2013 mainly due to debt issuance at the beginning of the year and the negative translation effect resulting from the devaluation of the end of period exchange rate of the Mexican peso⁽¹⁾ as applied to our U.S. dollar denominated debt position. Net debt decreased Ps. 5,202 million compared to year end 2013.

 

The weighted average cost of debt for the quarter was 7.94%. The following charts set forth the Company’s debt profile by currency and interest rate type and by maturity date as of September 30, 2014.

 

Currency		% Total Debt(1)				% Interest Rate Floating(1)(2)
Mexican pesos			30.1	%			24.9	%
U.S. dollars			26.5	%			0.0	%
Colombian pesos			1.3	%			100.0	%
Brazilian reals			40.5	%			97.4	%
Argentine pesos			1.6	%			36.8	%

(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			1.0	%			1.8	%			7.8	%			0.4	%			29.1	%			59.9	%

 

(1)

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

 

 

 

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.

 

Revenues

 

Reported total revenues from our Mexico and Central America division increased 3.6% to Ps. 18,580 million in the third quarter of 2014, as compared to the same period in 2013, driven by revenue growth in all of our operations. Our average price per unit case, which is presented net of taxes, grew 3.4%, reaching Ps. 37.34, mainly supported by a price adjustment implemented in Mexico during the first quarter of 2014. On a currency neutral basis, total revenues in the division increased 3.8%.

 

Reported total sales volume increased 0.5% to 497.0 million unit cases in the third quarter of 2014, as compared to the third quarter of 2013. Our sparkling beverage category increased 0.6%, driven by 2% growth of brand Coca-Cola. Our water portfolio, including bulk water, grew 2.2%, mainly driven by 2% growth of brand Ciel. These increases compensated for a 5.9% decrease of our still beverage category.

 

Operating Income

 

Our reported gross profit increased 5.3% to Ps. 9,365 million in the third 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 most of our division’s currencies⁽¹⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 50.4% in the third quarter of 2014, an expansion of 80 basis points as compared to the same period of the previous year.

 

Reported operating income⁽²⁾ increased 1.3% to Ps. 2,869 million in the third quarter of 2014. Our reported operating margin reached 15.4% in the third quarter of 2014. Our operating expenses increased only 2.3% and decreased as a percentage of revenues in the division as compared with the third quarter of 2013.

 

Reported operative cash flow grew 6.8% to Ps. 4,093 million in the third quarter of 2014 as compared to the same period in 2013. Our reported operative cash flow margin was 22.0%, an expansion of 60 basis points.

 

(1)

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

(2)

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 third quarter and first nine months results of 2014 was 12.00 bolivars per U.S. dollar as per the auction held on September 25, 2014.

 

Volume and average price per unit case exclude beer results.

 

Revenues

 

Reported total revenues were Ps. 23,201 million in the third quarter of 2014, an increase of 18.6% 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 Colombian and Brazilian operations, and (iii) despite the negative translation effect of the devaluation of the currencies in the division.⁽²⁾ Excluding beer, which accounted for Ps. 1,589 million during the quarter, revenues increased 15.3% to Ps. 21,612 million. On a currency neutral basis and excluding Fluminense and Spaipa,⁽¹⁾ total revenues increased 37.3% due to average price per unit case increases in Venezuela, Brazil and Argentina, and volume growth in Colombia and Venezuela.

 

Reported total sales volume in our South America division increased 19.0% to 358.4 million unit cases in the third 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 and Venezuela. Excluding the non-comparable effect of the acquisitions in Brazil,⁽¹⁾ volume increased 0.9% to 303.8 million unit cases. On the same basis, our still beverage category grew 11.1% driven by the Jugos del Valle line of business in the division, including growth of del Valle Fresh in Colombia. Our bottled water category grew 9.5% driven by Aquarius and Bonaqua in Argentina and Crystal in Brazil. Our sparkling beverage category remained flat. These increases compensated for a volume decline in our bulk water category.

 

Operating Income

 

Reported gross profit reached Ps. 10,222 million, an increase of 17.8% in the third 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 most of the currencies in the division ⁽²⁾ as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 44.1% in the third quarter of 2014.

 

Our reported operating income increased 32.5% to Ps. 2,957 million in the third quarter of 2014, compared to the same period of 2013, 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. This growth was partially offset by the negative translation effect resulting from using the SICAD exchange rate to translate the results of our Venezuelan operation. Excluding the recently integrated territories in Brazil, operating expenses decreased 0.9% despite higher labor and freight costs in Venezuela, Colombia and Brazil, and continued marketing investments to support our marketplace execution and bolster our returnable packaging base in Brazil. Our reported operating margin expanded 130 basis points to 12.7% in the third quarter of 2014.

 

Reported operative cash flow grew 31.5% to Ps. 3,915 million in the third quarter of 2014 as compared to the same period in 2013. Our reported operative cash flow margin expanded 170 basis points to 16.9%. Excluding the recently integrated territories in Brazil, operating cash flow margin expanded 230 basis points to 17.5%.

 

(1)

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

(2)

See page 13 for average and end of period exchange rates for the third quarter and the first nine 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 results for the months of January, 2014 through August, 2014 and Spaipa’s results for the months of January, 2014 through September, 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 third quarter and first nine months results of 2014 was 12.00 bolivars per U.S. dollar as per the auction held on September 25, 2014.

 

Our reported consolidated total revenues increased 12.2% to Ps. 123,114 million in the first nine 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 Mexico,⁽¹⁾⁽²⁾ (ii) revenue growth in our Venezuelan operation, despite using the SICAD exchange rate for translation purposes, (iii) revenue growth in most of our territories, and (iv) despite the negative translation effect originated by the devaluation of the currencies in most of our territories.⁽³⁾ Excluding the integrated territories in Brazil and Mexico,⁽¹⁾⁽²⁾ total revenues increased 1.2%. 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 22.4%, in the first nine months of 2014.

 

Reported total sales volume increased 8.5% to 2,520.5 million unit cases in the first nine 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 remained almost flat at 2,305.5 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 5.3%, driven by Crystal in Brazil, Nevada in Venezuela and Bonaqua in Argentina. The still beverage category grew 2.8%, 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 11.9% to Ps. 57,636 million in the first nine months of 2014, as compared to the same period of 2013. Lower sweetener 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 remained almost flat at 46.8%.

 

Our reported operating income increased 13.9% to Ps. 16,516 million in the first nine months of 2014 and our reported operating margin was 13.4%. Excluding the integration of the new territories in Brazil and Mexico,⁽¹⁾⁽²⁾ operating income increased 6.7%, reaching Ps. 15,471 million, representing an operating margin of 13.9%. 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 nine months of 2014, the other operative expenses, net line recorded an expense of Ps. 462 million, mainly related to (i) an operative currency fluctuation effect in Venezuela, (ii) restructuring charges in our Mexican operation and (iii) the loss on sale of certain fixed assets.

 

The share of the profits of associates and joint ventures line recorded a loss of Ps. 383 million in the first nine 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 a gain in the participation of our non-carbonated beverage joint-ventures in Brazil.

 

Reported operative cash flow grew 18.5% to Ps. 23,203 million in the first nine months of 2014 as compared to the same period in 2013. Our reported operative cash flow margin expanded 100 basis points to 18.8%. Excluding the recently integrated territories in Brazil and Mexico,⁽¹⁾⁽²⁾ operating cash flow margin expanded 180 basis points to 19.6%.

 

During the first nine months of 2014, income tax, as a percentage of income before taxes, was 27.4% as compared to 32.5% in the same period of 2013. The lower effective tax rate registered during 2014 is related to a one-time benefit resulting from the settlement of certain contingent tax liabilities under the tax amnesty program offered by the Brazilian tax authorities.

 

The benefit resulting from the settlement of this tax contingency was recorded as (i) a gain in the other non-operative expenses line due to the cancellation of a previously recorded provision and (ii) a reduction of income taxes.

 

Our consolidated net controlling interest income grew 1.5% to Ps. 8,415 million in the first nine months of 2014. Earnings per share (EPS) in the first nine months of 2014 were Ps. 4.06 (Ps. 40.59 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 results for the months of January, 2014 through August, 2014 and Spaipa’s results for the months of January, 2014 through September, 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 third quarter and the first nine months of 2014.

 

 

 

Philippines Operation

 

Volume in the third quarter of 2014 grew close to 3% as compared to the same period of 2013. Supported by the performance of our new one-way single-serve platform, brands Coca-Cola, Royal and Sprite grew 7%, 22% and 19%, respectively. We continue with the expansion of our route-to-market model, reaching now close to 500,000 clients through a team of more than 2,100 pre-sellers. To this date, we have installed 4 new production lines to reinforce our single-serve one-way PET capacity, supporting our portfolio strategy.

 

RECENT DEVELOPMENTS

 

On September 11, 2014, Coca-Cola FEMSA was the only Mexican beverage company selected as a part of the Dow Jones Sustainability Emerging Markets Index, comprised of a group of only 86 emerging markets companies. This is the second consecutive time that our Company has had the privilege to be part of this group.

 

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 third quarter and first nine months results was 12.00 bolivars per U.S. dollar as per the auction held on September 25, 2014. As of October 20, 2014, the SICAD II exchange rate was 49.99 bolivars per U.S. dollar.

 

As of November, 2014 we will pay the second installment of the 2013 dividend in the amount of Ps. 1.45 per share.

 

CONFERENCE CALL INFORMATION

 

Our third quarter 2014 conference call will be held on October 22, 2014, 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.: 888-430-8709 or International: 719-457-2645. Participant code: 9882269. 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)

 

		3Q 14				% Rev				3Q 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)			855.4								795.4								7.5	%			0.7	%			2,520.5								2,322.7								8.5	%			-0.7	%
Average price per unit case (2)			46.88								45.83								2.3	%			2.1	%			46.83								45.91								2.0	%			0.8	%
Net revenues			41,689								37,272								11.9	%							122,883								109,123								12.6	%
Other operating revenues			92								222								-58.6	%							231								614								-62.4	%
Total revenues (3)			41,781				100	%			37,494				100	%			11.4	%			2.5	%			123,114				100	%			109,737				100	%			12.2	%			1.2	%
Cost of goods sold			22,196				53.1	%			19,919				53.1	%			11.4	%							65,478				53.2	%			58,225				53.1	%			12.5	%
Gross profit			19,585				46.9	%			17,575				46.9	%			11.4	%			4.5	%			57,636				46.8	%			51,512				46.9	%			11.9	%			3.3	%
Operating expenses			13,440				32.2	%			12,506				33.4	%			7.5	%							40,275				32.7	%			36,917				33.6	%			9.1	%
Mexico			103				0.2	%			(22	)			-0.1	%			-568.2	%							462				0.4	%			216				0.2	%			113.9	%
Operative equity method (gain) loss in associates(4)(5)			217				0.5	%			28				0.1	%			675.0	%							383				0.3	%			(121	)			-0.1	%			-416.5	%
Operating income (6)			5,825				13.9	%			5,063				13.5	%			15.1	%			7.9	%			16,516				13.4	%			14,500				13.2	%			13.9	%			6.7	%
Other non operative expenses, net			(291	)			-0.7	%			51				0.1	%			-672.5	%							(233	)			-0.2	%			232				0.2	%			-200.6	%
Non Operating equity method (gain) loss in associates(7)			(24	)			-0.1	%			(48	)			-0.1	%			-48.7	%							(96	)			-0.1	%			(111	)			-0.1	%			-13.7	%
Interest expense			1,454								623								133.4	%							4,305								1,830								135.2	%
Interest income			85								220								-61.4	%							403								441								-8.6	%
Interest expense, net			1,369								403								239.7	%							3,902								1,389								180.9	%
Foreign exchange loss (gain)			375								162								131.5	%							322								319								0.9	%
Loss (gain) on monetary position in Inflationary subsidiries			209								(76	)							-375.0	%							744								150								4.0
Market value (gain) loss on ineffective portion of derivative instruments			93								(32	)							-390.6	%							(67	)							(18	)							272.2	%
Comprehensive financing result			2,046								457								347.7	%							4,901								1,840								166.4	%
Income before taxes			4,094								4,603								-11.1	%							11,944								12,539								-4.7	%
Income taxes			581								1,596								-63.6	%							3,275								4,077								-19.7	%
Consolidated net income			3,513								3,007								16.8	%							8,669								8,462								2.4	%
Net income attributable to equity holders of the Company			3,343				8.0	%			2,954				7.9	%			13.2	%							8,415				6.8	%			8,292				7.6	%			1.5	%
Non-controlling interest			170								53								220.8	%							254								170								49.4	%
Operating income (6)			5,825				13.9	%			5,063				13.5	%			15.1	%			7.9	%			16,516				13.4	%			14,500				13.2	%			13.9	%			6.7	%
Depreciation			1,520								1,562								-2.7	%							4,836								4,555								6.2	%
Amortization and other operative non-cash charges			663								186								256.5	%							1,851								521								255.3	%
Operative cash flow (6)(8)			8,008				19.2	%			6,811				18.2	%			17.6	%			11.1	%			23,203				18.8	%			19,576				17.8	%			18.5	%			11.3	%

 

(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. 16,405 million from our Mexican operation and Ps. 10,147 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 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.

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		Sep-14				Dec-13
Current Assets
Cash, cash equivalents and marketable securities		Ps.	21,597			Ps.	15,306
Total accounts receivable			8,647				9,958
Inventories			8,427				9,130
Other current assets			8,312				8,837
Total current assets			46,983				43,231
Property, plant and equipment
Property, plant and equipment			86,464				86,961
Accumulated depreciation			(35,170	)			(35,176	)
Total property, plant and equipment, net			51,294				51,785
Investment in shares			16,704				16,767
Intangibles assets and other assets			102,372				103,556
Other non-current assets			2,547				1,326
Total Assets		Ps.	219,900			Ps.	216,665

 

Liabilities and Equity			Sep-14				Dec-13
Current Liabilities
Short-term bank loans and notes payable		Ps.	1,636			Ps.	3,586
Suppliers			16,083				16,220
Other current liabilities			18,138				12,592
Total Current Liabilities			35,857				32,398
Long-term bank loans and notes payable			59,914				56,875
Other long-term liabilities			8,702				10,239
Total Liabilities			104,473				99,512
Equity
Non-controlling interest			4,256				4,042
Total controlling interest			111,171				113,111
Total equity (1)			115,427				117,153
Total Liabilities and Equity		Ps.	219,900			Ps.	216,665

 

(1)

Includes the effect originated by using the state-run SICAD exchange rate of 12.00 bolivars per U.S. dollar as of September 25, 2014.

 

 

 

Mexico & Central America Division

Expressed in millions of Mexican pesos(1)

 

		3Q 14				% Rev				3Q 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)			497.0								494.3								0.5	%			0.5	%			1,445.1								1,454.0								-0.6	%			-3.3	%
Average price per unit case			37.34								36.09								3.4	%			3.4	%			37.25								35.83								4.0	%			3.7	%
Net revenues			18,557								17,841								4.0	%							53,823								52,092								3.3	%
Other operating revenues			23								94								-75.5	%							67								256								-73.8	%
Total revenues (2)			18,580				100.0	%			17,935				100.0	%			3.6	%			3.6	%			53,890				100.0	%			52,348				100.0	%			2.9	%			-0.1	%
Cost of goods sold			9,215				49.6	%			9,038				50.4	%			2.0	%							26,573				49.3	%			26,487				50.6	%			0.3	%
Gross profit			9,365				50.4	%			8,897				49.6	%			5.3	%			5.3	%			27,317				50.7	%			25,861				49.4	%			5.6	%			2.8	%
Operating expenses			6,187				33.3	%			6,048				33.7	%			2.3	%							18,189				33.8	%			17,460				33.4	%			4.2	%
Other operative expenses, net			75				0.4	%			(21	)			-0.1	%			-457.1	%							216				0.4	%			59				0.1	%			266.1	%
Operative equity method (gain) loss in associates (3)(4)			234				1.3	%			39				0.2	%			500.0	%							463				0.9	%			(97	)			-0.2	%			-577.3	%
Operating income (5)			2,869				15.4	%			2,831				15.8	%			1.3	%			1.3	%			8,449				15.7	%			8,439				16.1	%			0.1	%			-1.0	%
Depreciation, amortization & other operative non-cash charges			1,224				6.6	%			1,003				5.6	%			22.0	%							3,600				6.7	%			2,646				5.1	%			36.1	%
Operative cash flow (5)(6)			4,093				22.0	%			3,834				21.4	%			6.8	%			6.8	%			12,049				22.4	%			11,085				21.2	%			8.7	%			7.1	%

 

(1)

Except volume and average price per unit case figures.

(3)

Includes total revenues of Ps. 16,405 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)

 

		3Q 14				% Rev				3Q 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) (2)			358.4								301.1								19.0	%			0.9	%			1,075.4								868.7								23.8	%			3.6	%
Average price per unit case (2)			60.11								61.81								-2.8	%			0.8	%			59.70								62.79								-4.9	%			-2.2	%
Net revenues			23,133								19,431								19.1	%							69,060								57,031								21.1	%
Other operating revenues			68								128								-46.9	%							167								358								-53.4	%
Total revenues (3)			23,201				100.0	%			19,559				100.0	%			18.6	%			1.6	%			69,227				100.0	%			57,389				100.0	%			20.6	%			2.4	%
Cost of goods sold			12,979				55.9	%			10,881				55.6	%			19.3	%							38,907				56.2	%			31,738				55.3	%			22.6	%
Gross profit			10,222				44.1	%			8,678				44.4	%			17.8	%			3.8	%			30,320				43.8	%			25,651				44.7	%			18.2	%			3.7	%
Operating expenses			7,253				31.3	%			6,458				33.0	%			12.3	%							22,089				31.9	%			19,464				33.9	%			13.5	%
Other operative expenses, net			29				0.1	%			(1	)			0.0	%			-3000.0	%							244				0.4	%			150				0.3	%			62.7	%
Operative equity method (gain) loss in associates (4)			(17	)			-0.1	%			(11	)			-0.1	%			54.5	%							(80	)			-0.1	%			(24	)			0.0	%			233.3	%
Operating income (5)			2,957				12.7	%			2,232				11.4	%			32.5	%			16.3	%			8,067				11.7	%			6,061				10.6	%			33.1	%			17.4	%
Depreciation, amortization & other operative non-cash charges			958				4.1	%			745				3.8	%			28.6	%							3,088				4.5	%			2,430				4.2	%			27.1	%
Operative cash flow (5)(6)			3,915				16.9	%			2,977				15.2	%			31.5	%			16.8	%			11,155				16.1	%			8,491				14.8	%			31.4	%			16.8	%

 

(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. 10,147 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 September 30, 2014 and 2013

Expressed in millions of Mexican pesos.

 

				3Q 14						3Q 13
Capex				2,946.8		Capex				3,458.3
Depreciation				1,520.0		Depreciation				1,562.0
Amortization & Other non-cash charges				663.0		Amortization & Other non-cash charges				186.0

 

VOLUME

Expressed in million unit cases

 

Mexico	3Q 14						3Q 13
	Sparkling	Water (1)	Bulk Water (2)	Still	Total		Sparkling	Water (1)	Bulk Water (2)	Still	Total
Mexico	330.9	25.4	78.1	22.3	456.7		331.8	23.7	77.5	24.3	457.3
Central America	33.6	2.4	0.1	4.2	40.3		30.9	1.8	0.1	4.2	37.0
Mexico & Central America	364.5	27.8	78.2	26.5	497.0		362.7	25.5	77.6	28.5	494.3
Colombia	54.1	6.3	7.1	7.8	75.3		48.9	5.6	7.7	5.8	68.0
Venezuela	53.9	3.7	0.6	4.7	62.8		52.0	3.6	0.8	4.5	60.9
Brazil	147.6	9.1	1.2	8.6	166.5		105.4	6.3	0.9	5.8	118.4
Argentina	46.7	4.3	0.2	2.5	53.8		47.8	3.5	0.1	2.4	53.8
South America	302.4	23.4	9.1	23.5	358.4		254.1	19.0	9.5	18.5	301.1
Total	666.9	51.2	87.3	50.0	855.4		616.8	44.5	87.1	47.0	795.4

 

(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

 

	3Q 14						3Q 13
	Sparkling	Water (2)	Bulk Water (3)	Still	Total		Sparkling	Water (2)	Bulk Water (3)	Still	Total
Brazil Organic	98.4	6.7	0.9	5.9	111.8		105.4	6.3	0.9	5.8	118.4
South America Organic	253.2	21.0	8.8	20.9	303.8		254.1	19.0	9.5	18.5	301.1
Total Organic	617.7	48.8	87.0	47.4	800.8		616.8	44.5	87.1	47.0	795.4

 

(1)

Excludes volume from Fluminense for the months of July, 2014 and August, 2014 and Spaipa for July, 2014 through September, 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

 

 

 

For the nine months ended September 30, 2014 and 2013

 

Expressed in millions of Mexican pesos.

 

				YTD 14						YTD 13
Capex				6,993.6		Capex				8,091.5
Depreciation				4,836.0		Depreciation				4,555.0
Amortization & Other non-cash charges				1,851.0		Amortization & Other non-cash charges				521.0

 

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	949.3	77.8	229.4	67.6	1,324.1		957.5	72.4	237.1	72.8	1,339.8
Central America	101.2	7.1	0.3	12.4	121.0		95.9	5.8	0.3	12.2	114.2
Mexico & Central America	1,050.5	84.9	229.7	80.0	1,445.1		1,053.4	78.2	237.4	85.0	1,454.0
Colombia	157.6	17.6	21.5	21.8	218.5		144.0	16.5	22.4	15.5	198.4
Venezuela	154.6	10.0	1.6	14.1	180.4		146.2	8.9	2.1	11.7	168.9
Brazil	456.9	29.7	3.8	27.2	517.7		303.2	17.8	2.4	17.5	340.9
Argentina	139.0	12.3	0.4	7.1	158.8		142.2	11.0	0.4	6.9	160.5
South America	908.1	69.6	27.4	70.3	1,075.4		735.6	54.2	27.3	51.6	868.7
Total	1,958.6	154.5	257.1	150.3	2,520.5		1,789.0	132.4	264.7	136.6	2,322.7

 

(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

 

	YTD 14						YTD 13
	Sparkling	Water (2)	Bulk Water (3)	Still	Total		Sparkling	Water (2)	Bulk Water (3)	Still	Total
Mexico Organic	916.5	72.8	229.2	65.9	1,284.4		957.5	72.4	237.1	72.8	1,339.8
Mexico & Central America Organic	1,017.7	79.9	229.5	78.3	1,405.4		1,053.4	78.2	237.4	85.0	1,454.0
Brazil Organic	299.8	21.7	2.6	18.3	342.4		303.2	17.8	2.4	17.5	340.9
South America Organic	751.0	61.6	26.1	61.4	900.1		735.6	54.2	27.3	51.6	868.7
Total Organic	1,768.7	141.5	255.6	139.7	2,305.5		1,789.0	132.4	264.7	136.6	2,322.7

 

	(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

 

 

 

September 2014
Macroeconomic Information
				Inflation (1)
				LTM	3Q 2014		YTD
		Mexico		4.22%	1.08%		2.18%
		Colombia		2.86%	0.49%		3.08%
		Venezuela (2)		62.02%	10.88%		43.87%
		Brazil		6.75%	0.83%		4.61%
		Argentina		23.76%	4.20%		19.84%
		(1) Source: inflation is published by the Central Bank of each country.
		(2) Inflation based on unofficial publications as of October 15th, 2014.
Average Exchange Rates for each Period
		Quarterly Exchange Rate (local currency per USD)					YTD Exchange Rate (local currency per USD)
		3Q 14		3Q 13	Δ%		2014	2013	Δ%
Mexico		13.1114		12.9141	1.5%		13.1167	12.6806	3.4%
Guatemala		7.7674		7.8847	-1.5%		7.7706	7.8422	-0.9%
Nicaragua		26.1153		24.8717	5.0%		25.7995	24.5709	5.0%
Costa Rica		544.7856		505.6211	7.7%		545.1330	505.3980	7.9%
Panama		1.0000		1.0000	0.0%		1.0000	1.0000	0.0%
Colombia		1,910.5851		1,907.6137	0.2%		1,944.3202	1,853.7552	4.9%
Venezuela		11.2148		6.3000	78.0%		9.7229	5.9825	62.5%
Brazil		2.2752		2.2883	-0.6%		2.2896	2.1180	8.1%
Argentina		8.2982		5.5865	48.5%		7.9937	5.2809	51.4%
End of Period Exchange Rates
		Exchange Rate (local currency per USD)					Exchange Rate (local currency per USD)
		Sep 14		Sep 13	Δ%		Jun 14	Jun 13	Δ%
Mexico		13.4541		13.0119	3.4%		13.0323	13.0235	0.1%
Guatemala		7.6712		7.9337	-3.3%		7.7786	7.8330	-0.7%
Nicaragua		26.2733		25.0222	5.0%		25.9521	24.7163	5.0%
Costa Rica		545.5200		505.5700	7.9%		548.6600	504.5300	8.7%
Panama		1.0000		1.0000	0.0%		1.0000	1.0000	0.0%
Colombia		2,028.4800		1,914.6500	5.9%		1,881.1900	1,929.0000	-2.5%
Venezuela		12.0000		6.3000	90.5%		10.6000	6.3000	68.3%
Brazil		2.4510		2.2300	9.9%		2.2025	2.2156	-0.6%
Argentina		8.4300		5.7930	45.5%		8.1330	5.3880	50.9%