Core Insights - Coca-Cola FEMSA, S.A.B. de C.V. (KOF) reported Q3 results that exceeded analyst expectations, with an EPS of MXN 28.07 against a consensus estimate of MXN 27.60, driven by resilient demand in South America despite soft conditions in Mexico [2][3] Financial Performance - The company achieved a 3.3% year-over-year growth in total revenue, reaching MXN 71.9 billion, while operating income increased by 6.8% to MXN 10.3 billion, resulting in a margin expansion of 50 basis points to 14.3% [3] - Adjusted EBITDA also saw a growth of 3.7%, indicating strong operational performance supported by cost controls and productivity gains [3] Regional Performance - In Mexico, volumes declined by 3.7% due to weaker consumer spending and pending excise tax hikes, contrasting with a 2.6% volume growth in South America, primarily driven by Brazil's strong performance and the success of Coca-Cola Zero [4] - The company is implementing affordability initiatives, digital rollouts like Juntos+ Advisor, and disciplined commodity hedging to mitigate tax and cost pressures, positioning itself for long-term growth amid macroeconomic volatility [4]

Financial Data and Key Metrics Changes - Consolidated volume declined 0.6% to 1.04 billion unit cases, showing sequential improvement compared to the second quarter [8] - Total revenues grew 3.3% to MXN 71.9 billion, with a currency-neutral increase of 4.7% [9] - Gross profit increased 0.9% to MXN 32.4 billion, leading to a margin contraction of 100 basis points to 45.1% [9] - Operating income rose 6.8% to MXN 10.3 billion, with operating margin expanding 50 basis points to 14.3% [9] - Adjusted EBITDA increased 3.2% to MXN 14.4 billion, with EBITDA margin remaining flat at 20.1% [10] - Majority net income slightly increased to MXN 5.9 billion, driven mainly by operating income growth [10] Business Line Data and Key Metrics Changes - In Mexico, volumes declined 3.7% due to a soft macroeconomic backdrop, while Coca-Cola Zero grew 23% year on year [10][12] - Guatemala saw a volume increase of 3.2% to 50.8 million unit cases, with Coca-Cola Zero growing 16.9% [16] - In Brazil, volumes increased 2.6% year on year, with Coca-Cola Zero growing volumes by 38% [18] - Colombia's volumes grew 2.9%, reflecting a gradually recovering economy [20] Market Data and Key Metrics Changes - Mexico faced a soft macroeconomic environment impacting consumer preferences and demand [7] - South America experienced a more resilient macro and consumer environment, supporting positive volume performance [7] - The House of Representatives approved an 87% increase in the excise tax on soft drinks in Mexico, effective January 2026 [14] Company Strategy and Development Direction - The company focuses on a sustainable growth model, RGM affordability initiatives, and cost control measures to navigate challenging operating conditions [8] - The strategy includes maintaining household penetration and volume base while addressing short-term headwinds with productivity initiatives [15][24] - The company aims to incentivize low and non-caloric products in response to the new excise tax [15][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in adapting to challenging conditions, particularly in Mexico due to the excise tax increase [7][15] - The company anticipates a challenging year for volume performance in Mexico in 2026 but expects positive brand equity impacts from the World Cup [15] - Management highlighted the importance of maintaining competitive positioning and adapting strategies in Argentina, Colombia, and Guatemala [40] Other Important Information - The company has implemented cost control measures and productivity initiatives to improve profitability [39] - The supply chain team has achieved significant savings, generating $90 million year to date [32] Q&A Session Summary Question: Insights on profitability improvement in Mexico and Central America - Management noted that profitability improvements were driven by savings initiatives and operational adjustments rather than solely volume recovery [37][39] Question: Strategies for Argentina, Colombia, and Guatemala - Management discussed the importance of maintaining household penetration and adapting strategies to local market conditions in these regions [40][44] Question: CapEx plans for next year - Management indicated a rethinking of CapEx, primarily delaying investments in response to expected volume declines due to the excise tax [50][52] Question: Volume outlook for Mexico next year - Management provided a preliminary outlook of low to mid-single-digit volume declines for Mexico, considering the impact of the excise tax [62][67] Question: Pricing strategies in light of new taxes - Management confirmed plans to pass through the excise tax and adjust pricing strategies to maintain consumer choice while incentivizing low-calorie options [86]

Financial Data and Key Metrics Changes - Consolidated volume declined 0.6% to reach 1.04 billion unit cases, showing sequential improvement compared to the second quarter [8] - Total revenues grew 3.3% to $71.9 billion pesos, with a currency-neutral increase of 4.7% [9] - Gross profit increased 0.9% to $32.4 billion pesos, leading to a margin contraction of 100 basis points to 45.1% [9] - Operating income rose 6.8% to $10.3 billion pesos, with operating margin expanding 50 basis points to 14.3% [9] - Adjusted EBITDA increased 3.2% to $14.4 billion pesos, with EBITDA margin remaining flat at 20.1% [10] - Majority net income slightly increased to $5.9 billion pesos, driven mainly by operating income growth [10] Business Line Data and Key Metrics Changes - In Mexico, volumes declined 3.7% due to a soft macroeconomic backdrop, while Coca-Cola Zero grew 23% year on year [10][12] - Guatemala saw a volume increase of 3.2% to 50.8 million unit cases, with Coca-Cola Zero growing 16.9% [16] - In Brazil, volumes increased 2.6% year on year, with Coca-Cola Zero growing volumes by 38% [18] - Colombia's volumes grew 2.9%, reflecting a gradually recovering economy [20] Market Data and Key Metrics Changes - Mexico faced a soft macroeconomic environment impacting consumer preferences and demand [7] - South America enjoyed a more resilient macro and consumer environment, supporting positive volume performance [7] - In Argentina, volumes increased 2.9%, despite a complex environment [22] Company Strategy and Development Direction - The company focuses on a sustainable growth model, RGM affordability initiatives, and cost control measures to navigate challenging operating conditions [7][16] - The company plans to continue incentivizing low and non-caloric products in response to the new excise tax in Mexico [15] - The strategy includes enhancing affordability, accelerating single-serve mix, leveraging digital initiatives, and maintaining a lean cost structure [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in adapting to challenging conditions, including the impact of the beverage excise tax increase in Mexico [7] - The company anticipates a challenging year for volume performance in Mexico due to the excise tax and modest economic growth [15] - Management highlighted the importance of maintaining household penetration and volume base amid economic pressures [78] Other Important Information - The company is rolling out a new digital tool, Juntos Plus Advisor, in Mexico to support share improvements [12] - The federal revenue law in Mexico includes an 87% increase in the excise tax on soft drinks, effective January 2026 [14] Q&A Session Summary Question: Insights on profitability improvement in Mexico and Central America - Management noted that profitability improvements were driven by savings initiatives and operational adjustments, despite ongoing gross profit pressures [37][39] Question: Strategies for Argentina, Colombia, and Guatemala - Management discussed the importance of maintaining household penetration and adapting strategies to local market conditions, emphasizing a sustainable long-term growth model [40][44] Question: CAPEX plans for next year - Management indicated a rethinking of CAPEX, primarily delaying investments in distribution centers due to expected volume declines [50][52] Question: Volume outlook for Mexico next year - Management provided a preliminary outlook of low to mid-single-digit volume declines for Mexico, considering the impact of the excise tax [62][67] Question: Pricing strategies in light of new taxes - Management plans to pass through the excise tax starting in January, with adjustments to pricing strategies to maintain consumer choice [85][86]

Financial Data and Key Metrics Changes - Consolidated volume declined 0.6% to 1,040 million unit cases, showing sequential improvement compared to the second quarter [8] - Total revenues grew 3.3% to MXN 71.9 billion, with a currency neutral increase of 4.7% [9] - Gross profit increased 0.9% to MXN 32.4 billion, leading to a margin contraction of 100 basis points to 45.1% [10] - Operating income rose 6.8% to MXN 10.3 billion, with operating margin expanding 50 basis points to 14.3% [10] - Adjusted EBITDA increased 3.2% to MXN 14.4 billion, with EBITDA margin remaining flat at 20.1% [11] - Majority net income slightly increased to ARS 5.9 billion, driven mainly by operating income growth [11] Business Line Data and Key Metrics Changes - In Mexico, volumes declined 3.7% due to a soft macroeconomic backdrop, while Coca Cola Zero grew 23% year on year [12][14] - Guatemala saw a volume increase of 3.2% to 50.8 million unit cases, with Coca Cola Zero Sugar growing 16.9% [17] - Brazil's volumes increased 2.6% year on year, driven by share gains and a successful Star Wars campaign for Coca Cola Zero [19] - Colombia's volumes grew 2.9%, supported by share gains in brand Coca Cola and flavors [22] - Argentina's volumes also increased 2.9%, with a focus on affordability and digital initiatives [26] Market Data and Key Metrics Changes - Mexico faced a soft macroeconomic environment impacting consumer preferences, while South America showed a more resilient consumer environment [7] - In Brazil, despite lower temperatures and slower growth, volumes increased due to share gains [19] - Colombia's economy is gradually recovering, driven by improving sectors such as commerce and agriculture [22] - Argentina's strategy focused on maintaining household penetration during economic challenges, leading to better positioning for recovery [48] Company Strategy and Development Direction - The company aims to adapt to challenging operating conditions, focusing on sustainable growth, affordability initiatives, and cost control measures [8][16] - Plans to install 125,000 coolers during the year to enhance market presence [14] - The company is committed to incentivizing low and non-caloric products in response to the new excise tax in Mexico [15][16] - Emphasis on maintaining household penetration and volume base despite expected declines due to tax increases [82] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the impact of the beverage excise tax increase in Mexico, anticipating a challenging year ahead [16] - Positive brand equity expected from the World Cup, which may offset some negative impacts [16] - The company is prepared for potential volatility in the trade environment but sees stability in key commodities [33][34] - Management highlighted the importance of maintaining a lean cost structure and focusing on productivity improvements [26] Other Important Information - The company is implementing a new digital sales tool, Juntos Plus Advisor, to enhance service levels and share improvements [14] - The recent passing of a board member was acknowledged, reflecting on their contributions to the company [6] Q&A Session Summary Question: Insights on profitability improvement in Mexico and Central America - Management noted that profitability improvements were driven by savings initiatives and operational adjustments rather than solely volume recovery [44][47] Question: Strategies for Argentina, Colombia, and Guatemala - Management discussed maintaining household penetration in Argentina during economic downturns and adjusting strategies in Colombia and Guatemala to capture growth opportunities [48][52] Question: CapEx plans for next year - Management indicated a rethinking of CapEx, delaying some investments due to expected volume declines [58][60] Question: Volume outlook for Mexico next year - Management provided a preliminary outlook of low to mid single-digit volume declines for Mexico, considering the impact of the excise tax [63][73] Question: Pricing strategies in light of new taxes - Management confirmed plans to pass through the excise tax and adjust pricing strategies to encourage consumer shifts towards non-caloric options [89]

Financial Data and Key Metrics Changes - Consolidated volume declined 0.6% to reach 1.04 billion unit cases, showing sequential improvement compared to the second quarter [6] - Total revenues grew 3.3% to $71.9 billion pesos, driven by revenue management initiatives, despite volume decline and unfavorable currency translation effects [7] - Gross profit increased 0.9% to $32.4 billion pesos, with a margin contraction of 100 basis points to 45.1% [8] - Operating income rose 6.8% to $10.3 billion pesos, with operating margin expanding 50 basis points to 14.3% [8] - Adjusted EBITDA increased 3.2% to $14.4 billion pesos, with EBITDA margin remaining flat at 20.1% [9] - Majority net income slightly increased to $5.9 billion pesos, driven mainly by operating income growth [9] Business Line Data and Key Metrics Changes - In Mexico, volumes declined 3.7% due to a soft macroeconomic backdrop, while Coca-Cola Zero grew 23% year on year [10][11] - Guatemala saw a volume increase of 3.2% to 50.8 million unit cases, with Coca-Cola Zero growing 16.9% year on year [14][15] - In Brazil, volumes increased 2.6% year on year, driven by share gains and a successful campaign for Coca-Cola Zero, which grew volumes by 38% [17][18] - Colombia's volumes grew 2.9%, supported by share gains in brand Coca-Cola and flavors [19][20] - Argentina's volumes increased 2.9%, with a focus on enhancing affordability and leveraging digital initiatives [20][21] Market Data and Key Metrics Changes - Mexico faced a soft macroeconomic environment impacting consumer preferences, while South America showed a more resilient macro and consumer environment [5] - The recent excise tax increase in Mexico is expected to impact volume performance in 2026, with anticipated modest economic growth of 1.5% [13] - In Brazil, despite lower average temperatures and signs of slower growth, the company managed to increase volumes due to share gains [17] - Colombia's economy is gradually recovering, driven by improving sectors such as commerce and agriculture [19] Company Strategy and Development Direction - The company aims to focus on sustainable growth, RGM affordability initiatives, and cost control measures to navigate challenging operating conditions [6][14] - The strategy includes enhancing affordability, accelerating single-serve mix, leveraging digital initiatives, and maintaining a lean cost structure [21][23] - The company is committed to incentivizing low and non-caloric products in response to the new excise tax [13][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in adapting to challenging conditions, particularly in Mexico, while also highlighting the importance of community support initiatives following recent storms [4][5] - The company anticipates a challenging year for volume performance in Mexico due to the excise tax increase, but expects positive brand equity impacts from the World Cup [13] - Management noted that the operational structure has been adjusted to align with current volume conditions, preparing for expected challenges [39] Other Important Information - The company has engaged with the government regarding proposed excise taxes and reaffirmed its commitment to low and non-caloric products [13] - The company has locked in a significant portion of its main commodities for the remainder of the year, providing visibility and comfort for the fourth quarter [30] Q&A Session Summary Question: Insights on profitability improvement in Mexico and Central America - Management indicated that profitability improvements were driven by savings initiatives and operational adjustments, despite ongoing gross profit pressures [36][39] Question: Strategies for Argentina, Colombia, and Guatemala - Management discussed the importance of maintaining household penetration and adapting strategies to local market conditions, emphasizing the need for a sustainable long-term growth model [40][43] Question: CAPEX adjustments for next year - Management confirmed that CAPEX would be rethought, primarily delaying investments in distribution centers due to expected volume declines [48][49] Question: Volume outlook for Mexico next year - Management provided a preliminary outlook of low to mid-single-digit volume declines for Mexico, influenced by the upcoming excise tax [53][61] Question: Pricing strategies in response to new taxes - Management plans to pass through the excise tax while maintaining consumer choice and gradually shifting towards low or non-caloric options [76] Question: Consumer dynamics in Brazil - Management acknowledged softer consumer dynamics in Brazil but noted that share gains and a strong base from the previous year supported growth [59][60]

Financial Performance - Total revenues for Q3 2025 increased by 3.3% to Ps. 71,884 million, with a currency-neutral growth of 4.7%[22] - Operating income rose by 6.8% to Ps. 10,291 million, with a margin expansion of 50 basis points to 14.3%[25] - Majority net income increased by 0.7% to Ps. 5,898 million, with earnings per share at Ps. 0.35[31] - For the first nine months of 2025, total revenues increased by 5.0% to Ps. 213,984 million, with a currency-neutral growth of 5.7%[38] - Gross profit for Q3 2025 was Ps. 32,391 million, reflecting a 0.9% increase, while gross margin contracted to 45.1%[24] - Gross profit increased by 4.3% to Ps. 96,850 million, with a gross margin contraction of 30 basis points to 45.3% due to higher fixed costs and currency depreciation[39] - Operating income rose by 4.3% to Ps. 29,234 million, while the operating margin contracted by 10 basis points to 13.7% primarily due to increased expenses[40] - Earnings per share were Ps. 0.97, with earnings per unit at Ps. 7.78 and per ADS at Ps. 77.80, calculated using 16,806.7 million shares outstanding[46][47] - Adjusted EBITDA for Q3 2025 was 14,449 million Pesos, a 3.2% increase from 14,001 million Pesos in Q3 2024[80] - Adjusted EBITDA for Q3 2025 was 5,169 million Pesos, representing a 12.6% increase compared to the same quarter last year[83] Volume and Transactions - Volume declined by 0.6% to 1,035.0 million unit cases, primarily due to decreases in Mexico and Panama[22] - Total volume for 3Q 2025 decreased by 0.6% to 1,035.0 million unit cases compared to 3Q 2024[90] - Total transactions in Q3 2025 totaled 6,192.7 million, a slight increase of 0.6% from 6,153.2 million in Q3 2024[75] - Total transactions for 3Q 2025 were 6,192.8 million, a slight increase of 0.6% from 6,153.2 million in 3Q 2024[90] Regional Performance - Total revenues in the Mexico & Central America division decreased by 0.2% to Ps. 42,467 million, impacted by volume decline and promotional activities[52] - Gross profit in the Mexico & Central America division decreased by 2.6% to Ps. 20,163 million, with a gross margin contraction of 110 basis points to 47.5%[53] - Total revenues in the South America division increased by 8.7% to Ps. 29,416 million, driven by revenue management initiatives[60] - Operating income in the South America division increased by 19.7% to Ps. 3,505 million, resulting in an operating margin expansion of 110 basis points to 11.9%[62] - In Colombia, revenues grew by 11.9% year-over-year to 5,798 million Mexican Pesos in 3Q 2025[90] - Brazil's revenues increased by 11.5% year-over-year to 19,792 million Mexican Pesos in 3Q 2025[90] - In Mexico, year-to-date revenues for 2025 slightly decreased by 0.5% to 102,320 million Mexican Pesos[96] - In Argentina, revenues decreased by 10.9% year-over-year to 2,542 million Mexican Pesos in 3Q 2025[90] Costs and Expenses - The company reported a comprehensive financing expense of Ps. 1,290 million, up from Ps. 823 million in the previous year, mainly due to higher interest expenses[27] - Comprehensive financing result recorded an expense of Ps. 3,588 million, up from Ps. 2,918 million in the previous year, driven by higher interest expenses[42] - Cost of goods sold in Q3 2025 was 39,493 million Pesos, representing 54.9% of total revenues, compared to 37,507 million Pesos or 53.9% in Q3 2024[75] - Operating expenses decreased slightly to 22,356 million Pesos, accounting for 31.1% of total revenues in Q3 2025, down from 32.2% in Q3 2024[75] Market Conditions and Strategic Initiatives - The Mexican House of Representatives approved an increase in the excise tax on sugar-sweetened beverages from Ps. 1.64 to Ps. 3.08 per liter[15] - The company achieved a score of 79/100 in S&P Global's 2025 Corporate Sustainability Assessment, an increase of 9 points from the previous year[15] - More than 60% of the company's total client base are now digital monthly active buyers[13] - Coca-Cola FEMSA reported significant performance metrics in 3Q25, reflecting resilience in challenging economic conditions[103] - The company continues to focus on market expansion and innovation in product offerings to drive future growth[103] - Strategic initiatives are in place to enhance operational efficiency and adapt to fluctuating market dynamics[103] - The company is committed to leveraging new technologies to improve customer engagement and streamline operations[103] - Future guidance indicates a cautious but optimistic outlook, with expectations for gradual recovery in key markets[103] - Ongoing monitoring of inflation and exchange rate fluctuations will inform strategic decision-making moving forward[101][102] Exchange Rates and Inflation - Inflation rates in key markets for 3Q25: Argentina at 31.34%, Colombia at 5.00%, and Mexico at 3.74%[101] - Average exchange rate for USD in 3Q25: Argentina at 1,333.04 ARS, a 41.4% increase from 3Q24; Mexico at 18.65 MXN, a 1.5% decrease from 3Q24[102] - Year-to-date exchange rate for 2025 shows a 6.8% increase for Mexico, with an average of 19.54 MXN per USD[102] - End-of-period exchange rate for September 2025: Argentina at 1,380.00 ARS, a 42.2% increase from September 2024; Colombia at 3,901.29 COP, a 6.3% decrease[102]

Core Insights - The article emphasizes the importance of selecting high-quality dividend stocks to enhance passive income and improve retirement wealth [1] Group 1 - Nelson, a former corporate professional, transitioned to living off dividend income since 2022 [1]

Company Overview - Coca-Cola FEMSA is the largest Coca-Cola system bottler in the world by volume [1] - The company operates in 10 countries across Latin America [1] - It has more than 2 million sales outlets and offers leading brands in all its operating geographies [1]

Group 1 - The conference call is focused on reviewing Coca-Cola FEMSA's second quarter 2025 results, highlighting a transition to a Zoom-based platform for improved audio quality and participant connection [2][3][4] - Key participants in the call include the CEO Ian Craig and CFO Gerardo Cruz, indicating a strong leadership presence during the discussion [1][4] - The call will include a Q&A session, allowing participants to engage directly with the company's leadership [4]

Financial Data and Key Metrics Changes - Consolidated volume declined 5.5% to 1,035,000 unit cases, driven by declines in Mexico, Brazil, Colombia, and Panama, partially offset by growth in Argentina, Uruguay, Guatemala, and other Central American territories [8] - Total revenues grew 5% to COP72.9 billion, with a 2.4% increase on a neutral currency basis [9] - Gross profit increased 3.4% to MXN33 billion, with a margin contraction of 70 basis points to 45.3% [9] - Operating income remained flat at COP9.7 billion, with an OI margin contracting 60 basis points to 13.4% [10] - Adjusted EBITDA decreased 3.8% to MXN13.4 billion, with an EBITDA margin contraction of 160 basis points to 18.4% [10] - Majority net income decreased 5.3% to MXN5.3 billion, primarily due to increased comprehensive financial results from higher interest expenses and a lower foreign exchange gain [11] Business Line Data and Key Metrics Changes - In Mexico, volume declined 10%, cycling a historic second quarter from the previous year that grew 7.9% [11] - In Guatemala, volumes increased 1.6% to 51.3 million unit cases, with a 10,000 new customer increase [17] - In Brazil, volumes declined 1.5% year on year, cycling strong 12.1% growth from last year [19] - In Colombia, volumes declined 2.8% year on year, while in Argentina, volumes increased 11.9% [22][24] Market Data and Key Metrics Changes - Mexico faced a softer macroeconomic backdrop and adverse weather, impacting consumer behavior [7] - Brazil's volume performance was affected by colder temperatures, particularly in June [19] - Argentina's macro indicators improved, with monthly inflation below 2%, fostering a disciplined financial surplus policy [23] Company Strategy and Development Direction - The company remains focused on long-term sustainable growth, with investments in capacity expansions [7] - Key initiatives include improving customer service metrics and enhancing productivity [14][15] - The company is leveraging affordability initiatives in response to negative consumer sentiment in Mexico [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging first half of the year but remains optimistic about long-term perspectives [7] - The outlook for the second half of the year is cautious, with expectations of a more complex scenario due to economic factors [41] - Management is focused on leveraging local initiatives to recover momentum in the second half of 2025 [24] Other Important Information - The company completed key projects and began additional capacity initiatives during the first half of the year [15] - The Porto Alegre plant has returned to 100% capacity, with a full portfolio of SKUs restored [67][69] Q&A Session Summary Question: Expectations for the second half of the year and market share in Mexico - Management discussed a cautious outlook for the second half, with market share in modern trade above last year but below in traditional trade [41][43] Question: Performance in Brazil and channel specifics - Management indicated that weather was a key driver of performance in Brazil, with expectations for a rebound in volumes [44][45] Question: Pricing mix in Mexico and Brazil - Management noted that pricing held well in Mexico despite promotional spending, with a cautious pricing stance expected for the end of the year [49][54] Question: CapEx investments and updates on the Porto Alegre plant - Management confirmed commitment to structural capacity investments while adjusting volume-linked CapEx as needed [62][66] Question: Interest expense and leverage position - Management acknowledged higher interest expenses due to new financing and higher rates in Brazil, with expectations for balance sheet adjustments in the future [92][95]