Core Insights - FEMSA reported a mixed set of results for Q2 2025, facing challenges in Mexico due to a soft consumer environment and adverse weather, while operations outside Mexico showed strong performance [3][4]. Financial Performance - Total consolidated revenues grew by 6.3% in Q2 2025 compared to Q2 2024, while income from operations increased by 1.2% [5]. - Proximity Americas saw total revenues increase by 6.9%, but income from operations decreased by 2.8% compared to Q2 2024 [5]. - Coca-Cola FEMSA's total revenues and income from operations grew by 5.0% and 0.2%, respectively, against Q2 2024 [5]. Operational Highlights - Proximity Americas Mexico experienced weak traffic numbers, particularly in convenience categories like soft drinks, beer, and tobacco, which underperformed compared to other categories [4]. - Spin by OXXO had 9.4 million active users, representing an 18.8% growth compared to Q2 2024, while Spin Premia had 26.6 million active loyalty users, reflecting a 16.9% growth [5]. - The retail operations outside of Mexico showed encouraging signs, with improvements in competitive positioning and strong results in certain South American markets [4][5]. Strategic Focus - The company is focused on reversing traffic and volume trends while managing costs and expenses in the second half of the year [5]. - FEMSA is working with supplier partners to adjust product assortments and pricing strategies to remain competitive as they approach the key selling season in Q4 [4].

Group 1 - FEMSA filed its annual report on Form 20-F for the fiscal year ended December 31, 2024, with the U.S. SEC and other regulatory bodies [1] - The reports include FEMSA's audited financial statements and are available on the company's investor relations website [2] - FEMSA operates in the retail industry through its Proximity Americas Division, which includes OXXO, and Proximity Europe, which includes Valora [3] Group 2 - The company also has a Health Division that includes drugstores and digital financial services initiatives [3] - In the beverage industry, FEMSA is the largest franchise bottler of Coca-Cola products in the world by volume [3] - FEMSA employs over 392,000 people across 18 countries and is recognized in various sustainability indexes [3]

Core Viewpoint - FEMSA's shares have increased by 24.3% year-to-date, outperforming the broader industry and Consumer Staples sector, which grew by 10.7% and 5.7% respectively, while also surpassing the S&P 500's decline of 12.6% in the same period [1]. Stock Performance - At the current price of $106.23, FMX stock is trading at a 13.7% discount to its 52-week high of $123.09 and reflects a 31% premium from its 52-week low of $81.08 [5]. - The stock is above its 50 and 200-day moving averages, indicating a bullish sentiment [5]. Growth Strategies - FEMSA is focused on the FEMSA Forward Strategy, aimed at long-term value creation in its core businesses, including retail, Coca-Cola FEMSA, and Digital@FEMSA [6]. - The retail business, particularly the Proximity division, presents substantial long-term growth opportunities [6]. Digital Initiatives - FEMSA is advancing in the digital space through Digital@FEMSA, which aims to create a value-added digital and financial ecosystem [7]. - The company is investing in digital offerings, loyalty programs, and fintech platforms within its OXXO chains to strengthen its long-term position [8]. Business Unit Performance - FEMSA is experiencing solid growth trends across all business units, with significant opportunities in the Proximity and Health retail sectors [9]. - OXXO Mexico is a key pillar of FEMSA's retail operations, with a store network exceeding 1,000 locations and increasing productivity per store [11]. Valuation Perspective - FEMSA is trading at a forward 12-month price-to-earnings ratio of 19.79X, which is above the industry average of 12.49X, indicating a premium valuation [12]. - This premium is justified by FEMSA's consistent financial performance and growth prospects, driven by successful digital initiatives and strong performances in OXXO Mexico and OXXO Gas [13]. Investment Potential - The focus on the FEMSA Forward strategy, digital expansion, and potential in Proximity and Health retail businesses offers significant long-term growth opportunities [15].

Financial Data and Key Metrics Changes - Consolidated revenue growth of 12.8% in Q4 2024, with operating income rising by 31.5% compared to the previous year [21] - Net consolidated income increased by 78.3% to nearly MXN 11 billion, driven by a non-cash change gain of MXN 2.7 billion and higher net income from discontinued operations of MXN 3.3 billion [21][22] - Gross margin expanded by 230 basis points to 47.7%, with operating margin increasing by 50 basis points to 11.7% of sales [25][26] Business Line Data and Key Metrics Changes - Proximity Americas division saw total revenues grow by 13.2%, with same-store sales growth of 3.8% despite a 2.8% decline in average traffic [24] - Health division revenues grew by 13.3%, with same-store sales increasing by 9.4% and operating income rising by 109.7% [29] - OXXO Gas reported a 9.7% increase in same-station sales and an 8% increase in total revenues [32] Market Data and Key Metrics Changes - Proximity Europe revenues increased by 21.5% in pesos, driven by retail revenue growth across countries [27] - Coca-Cola FEMSA recorded double-digit increases across their income statement, with income from operations rising by 25% [36] Company Strategy and Development Direction - FEMSA Forward initiative is nearing completion of planned divestitures, having monetized approximately $10.7 billion to focus on core business units [11][39] - Plans for 2025 include deploying nearly MXN 66 billion or $3.2 billion in capital returns, including ordinary and extraordinary dividends and share buybacks [14][15] - The company aims to maintain a disciplined approach to capital allocation, focusing on long-term intrinsic value per share [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainties and a softer consumer environment in Mexico, emphasizing the urgency to drive growth and profitability [46] - The company remains optimistic about growth opportunities across its business units, leveraging digital capabilities and operational efficiencies [10][46] Other Important Information - The succession process for the CEO position is underway, with a special committee formed to oversee the process [16][18] - The digital ecosystem has been rebranded as Spin, with significant growth in active users and sales linked to the loyalty program [34][35] Q&A Session Summary Question: Insights on shareholder remuneration and buybacks - Management plans to execute a mix of local buybacks in Mexico and accelerated share repurchases in the US, similar to previous years [55][56] Question: OXXO store expansion versus same-store sales trends - Management is confident in the ongoing expansion of OXXO stores, monitoring performance closely to ensure value creation [62][63] Question: Traffic decline attribution and operating leverage - Traffic decline is attributed to various factors, including weather and cannibalization, but management is confident in the store performance metrics [72][76] Question: Growth strategy in the US - The focus will be on organic growth through OXXO standalone stores and small bolt-on acquisitions, with an emphasis on profitability [90][91] Question: Financial services growth and potential banking license - The company is expanding financial services and plans to apply for a banking license, focusing on responsible growth in this area [100][101]