Coca-Cola FEMSA, S.A.B. de C.V. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Fourth Quarter Results: Volume grew 2.2% year-on-year to 1.08 billion unit cases. Total revenues for the quarter grew 14.3% to MXN 75.5 billion. Gross profit increased 17.1% to MXN 35.7 billion, with a margin of 47.3%. Operating income increased 25% to MXN 12.1 billion, and the operating margin was 16%. Adjusted EBITDA increased 22.5% to MXN 16.1 billion, with a margin of 21.3%.
• Market Highlights:
  • Mexico: Volumes increased 0.8% year-on-year. Multi-serve and still beverages showed growth. 15 bottling plants broke production records.
  • Guatemala: Volumes grew 7.5% year-on-year. Expanded customer base and production capacity.
  • Brazil: Volumes grew 3.7% year-on-year. Coke Zero Sugar grew 63%. Juntos+ advisor tool rolled out in Brazil.
  • Colombia: Volumes declined 0.3% year-on-year, but multi-serve volumes increased. Added a new PET line in Barranquilla.
  • Argentina: Gradual recovery with improving macro indicators.
• Digital Initiatives: Juntos+ had 1.3 million monthly active users. The loyalty program, Premia Juntos Plus, had over 1.1 million enrolled users by year-end. Juntos+ advisor tool rolled out in Brazil.

Segment Performance

• Mexico and Central America Division: Volumes increased 1.5% to 589.6 million unit cases. Revenues grew 10.4% to MXN 41.5 billion. Gross profit increased 10% to MXN 20.3 billion, with a gross margin of 48.8%. Operating income rose 23.7% to MXN 6.9 billion, and the operating margin expanded to 16.7%. Adjusted EBITDA grew 23.7%, with a margin of 22.9%.
• South America Division: Volumes increased 3% to 489.5 million unit cases. Revenues grew 19.4% to MXN 33.9 billion. Gross profit increased 28.1%, leading to a margin of 45.4%. Operating income rose 26.9% to MXN 5.1 billion, and the operating margin was 15.1%. Adjusted EBITDA increased 20.7%, with a margin of 19.3%.

Guidance

• 2025 Outlook: Continue the sustainable long-term growth model. Expect mid-single-digit volume growth in Mexico. Plan to install 9 bottling lines in 2025. Target $90 million in supply chain savings. Focus on core business growth, Juntos+ expansion, and a customer-centric culture.

Risks

• Macro Environment: Tough macro dynamics and lower GDP projections pose challenges.
• Weather Events: Impact on infrastructure, such as the Porto Alegre plant closure and hurricanes, affecting operations.
• Supply Chain Constraints: Previous out-of-stocks and the need for capacity expansion to address unserved demand.

Question and Answer

• **Q: What are the expectations for Mexico volumes in 2025?

A: Mid-single-digit volume growth, but there are mixed consumer signals and a need to recover market share.

• **Q: How have digital initiatives impacted the business?

A: Juntos+ has 1.3 million monthly active users, and the Juntos+ advisor tool has improved sales force efficiency, with guided missions increasing SKUs per store and digital revenue.

• **Q: What is the status of the Porto Alegre plant?

A: The plant is being restarted, with 70% capacity expected by the end of March and full capacity by April.

• **Q: How has Coke Zero performed in Mexico?

A: Adjusted price architecture has helped, with momentum building as seen in other markets like Brazil.

• **Q: What is the outlook for CapEx and ROIC?

A: Confident in ROIC despite high CapEx, but the company is still below the 10% capacity slack needed, with plans to address this through ongoing investments.