Coca-Cola FEMSA, S.A.B. de C.V. Q1 FY2025 earnings call

CEO Ian Craig noted the company adapted to macroeconomic challenges with commercial, financial, and supply chain initiatives. Strategic pillars include growing the core business, advancing Juntos+, and fostering a customer-centric culture. In Mexico, volumes declined 5.4%, and the team adjusted the tactical calendar and implemented promotions. Guatemala saw a 1.9% volume increase, leveraging the Share a Coke campaign. Brazil had a 2.5% volume growth, with Juntos+ adding users. Colombia faced an 8.1% volume decline but identified cost efficiencies. Argentina and Uruguay saw volume growth, with Argentina implementing customer-centric strategies. Sustainability efforts included increasing renewable energy use to 84%, meeting water efficiency targets, and diverting 99% of operational waste from landfills.

Consolidated volume decreased by 2.2% year-on-year to 986.5 million unit cases. Sparkling beverage volume dropped 3.3%, while steel beverages grew 3.9% and bottled water increased by 4.6%. Total revenues for the quarter rose 10% to MXN70.2 billion. Gross profit increased 12% to MXN31.8 billion, with a margin expansion of 80 basis points to 45.4%. Operating income went up 7.3% to MXN9.2 billion. Adjusted EBITDA increased 11% to MXN13.3 billion, and majority net income grew by 2.7% to MXN5.1 billion. In the Mexico and Central America division, volumes declined 4.6% to 553.3 million unit cases, revenues increased 4.8%, and gross profit rose 5.6% to MXN18.9 billion with a gross margin of 47.6% and a 30 basis point expansion. In the South America division, volumes increased 1% to 433.2 million unit cases, revenues grew 17.4% to MXN30.5 billion, and gross profit increased 22.8% with a margin expansion of 190 basis points to 42.5%.

The strategic playbook for 2025 remains focused on three pillars. The company targeted about $90 million in savings in 2025, distributed across cost to make, cost to serve, and other areas. Brazil's rollout of tools is expected to continue aiding margin improvement, and Mexico is set to roll out the Juntos+ advisor tool around June-July. The second half of the year is expected to have easier comparisons.

Macro-economic uncertainty, intense competition, exchange rate fluctuations, and cost pressures from fixed costs and certain raw materials like aluminum (though it has a minor impact).

Q: Rodrigo Alcantara asked about Mexico's rapid adjustment to the uncertain environment and cost savings projection.

A: Ian Craig discussed Mexico's competitive environment and Gerardo Cruz mentioned approximately $90 million in savings planned for 2025.

Q: Felipe Ucros inquired about Latin America profitability and SG&A.

A: Ian and Gerardo Cruz discussed margin expansion in South America and SG&A pressure in Mexico.

Q: Henrique Morello questioned Mexico market share and Brazil capacity.

A: Ian and Jorge Collazo talked about market share recovery in Mexico and the Brazil capacity rollout timeline.

Q: Alejandro Fuchs asked about Brazil tool rollout to Mexico and working capital.

A: Ian discussed the Brazil tool rollout timeline, and Gerardo Cruz explained working capital drivers.

Q: Lucas Ferreira asked about Mexico April results and Brazil margins.

A: Ian and Jorge Collazo discussed the impact of Mexico's tactical calendar and Brazil's margin improvement.

Q: Renata Cabral asked about Mexico volume weakness and Easter impact.

A: Ian discussed factors affecting Mexico volume and Easter calendar impact.

Q: Antonio Hernandez asked about Mexico regional performance.

A: Gerardo Cruz discussed mixed monthly performance in Mexico and South America.

Q: Álvaro García asked about FEMSA spin and COGS outlook.

A: Ian discussed FEMSA spin learnings, and Gerardo Cruz provided an outlook on COGS regarding sweeteners and PET.

Q: Ulises Argote asked about insurance payments in Mexico.

A: Gerardo Cruz mentioned a net benefit of MXN65 million from insurance in Mexico during the quarter.