Coca-Cola FEMSA(US:KOF)2024-04-12 20:39Financial Reporting and Compliance - The consolidated financial statements are prepared in accordance with IFRS, with financial information presented in Mexican pesos[28]. - Argentina's cumulative inflation exceeded 100.0% over the three years prior to December 31, 2023, necessitating adjustments for inflationary effects in financial reporting[30]. - The company is subject to a 10.0% Mexican withholding tax on dividends paid to both Mexican and non-Mexican residents[38]. - The company faces risks related to compliance with evolving privacy and data protection laws, which could result in significant operational and financial repercussions[60][62]. - The company maintains a Global Integrity Compliance Program to address compliance risks, but unexpected breaches could harm its reputation and financial standing[77]. - The company has faced legal proceedings and investigations that could have an adverse effect on its financial condition and results of operations[80]. Dividends and Financial Performance - The company declared dividends of 2.900 Mexican pesos per share for the fiscal year 2022, with payments scheduled for May 3, 2023, and November 3, 2023[34]. - For the fiscal year 2023, the company plans to declare dividends of 1.520 Mexican pesos per share, with payments scheduled for April 16, July 16, October 15, and December 9, 2024[36]. - Total revenues for the year ended December 31, 2023, reached Ps. 245,088 million, with a gross profit of Ps. 110,860 million[106]. - Approximately 77.4% of the company's total revenues for the year ended December 31, 2023, were attributable to operations in Mexico and Brazil[82]. - The gross profit margin for Mexico and Central America was 64.6%, compared to 35.4% for South America[106]. Market Competition and Consumer Trends - The company faces significant competition in the beverage industry, including from Pepsi and local beverage brands, impacting pricing and market share[50]. - Changes in consumer preferences and regulatory actions may reduce demand for certain products, particularly those sweetened with sugar or sold in plastic bottles[48]. - The company competes mainly in terms of price, packaging, promotional activities, and product innovation across its territories[174]. Operational Risks and Environmental Concerns - Economic, political, and health crises, such as pandemics, may adversely affect the company's business and financial results[52]. - The company anticipates increased regulatory requirements regarding environmental, social, and governance (ESG) matters, which may lead to significant additional compliance costs[56]. - The company aims to reduce its carbon footprint by increasing the use of recycled packaging materials and participating in sustainability initiatives[57]. - The company relies heavily on water for production, and climate change may exacerbate water scarcity, affecting future production needs[65][66]. - All bottling plants in Mexico meet wastewater discharge standards set by local and federal authorities, with penalties for non-compliance[219]. - In Brazil, water exploitation is regulated by various laws, and companies must obtain necessary permits to use spring water in bottling plants[222]. Financial Strategies and Growth Initiatives - The company aims to grow its core business by capturing growth opportunities for the Coca-Cola portfolio and accelerating the growth of Coca-Cola Zero Sugar[138]. - Strategic M&A is a priority, with a focus on value-enhancing acquisitions and a disciplined approach[139]. - The company plans to increase manufacturing and distribution capacity while implementing best-in-class logistics and distribution enablers[139]. - The company has strengthened its relationship with The Coca-Cola Company, updating growth principles and digital strategy[137]. - The refreshed vision for 2023 emphasizes customer commitment and sustainable development[136]. Sales and Distribution - The company serves approximately 272 million consumers daily and operates 56 bottling plants and 251 distribution centers[102]. - The company markets and sells around 4.0 million unit cases per year through over 2.1 million points of sale[102]. - The company operates 173 distribution centers in Mexico and Central America and 79 in South America, serving over 1 million retailers[161]. - The company utilizes a variety of sales and distribution models, including pre-sale systems and digital platforms, to enhance efficiency[164]. Commodity Prices and Taxation - Increases in raw material prices, particularly for concentrate and packaging materials, could adversely affect the company's cost of goods sold and overall financial performance[67][70]. - Geopolitical conflicts and economic sanctions have led to volatile commodity markets, which may continue to impact raw material costs[71]. - The average price for PET resin in U.S. dollars increased by 32.5% in 2023 compared to 2022 across all territories[181]. - Sugar prices in Mexico increased approximately 42.1% in local currency as compared to 2022[188]. - The average taxation in Brazil for value-added tax over net sales in 2023 was approximately 16.3%[197]. Regulatory Changes and Tax Implications - The company is subject to various taxes that may increase due to new laws or modifications to existing tax regulations, adversely affecting financial results[78]. - Mexico's excise tax on beverages with added sugar and HFCS was Ps.1.5086 per liter for 2023, increasing to Ps.1.5737 per liter in 2024[198]. - Argentina imposes a value-added tax of 21.0% on sparkling beverages[197]. - Brazil's average production excise tax was approximately 2.6% and average sales tax was approximately 12.0% over net sales[198]. - The introduction of a new tax on single-use plastics in Colombia is set at 0.00005 on a Tax Value Unit per gram of plastic, with exemptions available for recycled materials[212].