FEMSA(US:FMX)2023-04-28 21:30Financial Data and Key Metrics Changes - Total revenues during the first quarter increased by 22%, while income from operations increased by 5.5% compared to the first quarter of 2022 [111] - On an organic basis, total revenues increased by 12.4% and income from operations increased by 3.3% [111] - Net consolidated income was Ps. 50.329 million, driven by a Ps. 40.6 million gain from the accounting remeasurement of FEMSA's investment in Heineken [95] - Gross margin was 40.3%, with a 160 basis points increase in the quarter, while operating margins decreased by 30 basis points [96][97] Business Line Data and Key Metrics Changes - OXXO same-store sales grew by 18.3% for the first quarter, the highest growth rate in the last 20 years, driven by an 11.9% increase in average customer ticket and a 5.7% growth in traffic [112] - The health division saw a slight decrease in revenues, with same-store sales down by an average of 5.5%, but on a currency-neutral basis, revenues grew by 14% [113] - Envoy Solutions reported a 23.7% increase in total revenues compared to the first quarter of 2022, although operating margin contracted by 140 basis points due to higher costs [114] Market Data and Key Metrics Changes - In Proximity Americas, 157 new units were added during the first quarter, reaching a total of 1,105 stores [10] - Coca-Cola FEMSA's total volume grew by 6.6%, with total revenues increasing by 12% and operating income growing by 12.9% [12] - Proximity Europe revenues were slightly above Ps. 10 billion, reflecting a recovery in traffic and ticket driven by improved customer mobility [11] Company Strategy and Development Direction - The company is focused on driving growth in core verticals and integrating its digital ecosystem with physical networks [6][8] - FEMSA Forward strategy aims to enhance value creation through sustainable practices and strategic alternatives for Envoy Solutions [7][24] - The company is committed to expanding its digital initiatives, including the integration of financial services and loyalty programs [31][91] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong business platform and ability to adapt to challenging environments, including high inflation and macroeconomic uncertainties [100] - The outlook for 2023 is positive, with expectations of strong unit growth in Mexico and continued performance improvements across various markets [45][46] - Management acknowledged the need for caution regarding future same-store sales growth, indicating that the 18% growth seen in Q1 may not be sustainable throughout the year [129] Other Important Information - The company has reduced its investment in Heineken from approximately 14% to 8%, which has positively impacted its leverage ratio, now at 1.8x [105] - The digital division is currently running a loss of about Ps. 900 million, with ongoing investments aimed at increasing user engagement and functionality [28][92] - The company is exploring opportunities for organic growth in its health division, particularly in Mexico, while also considering inorganic opportunities [153] Q&A Session Summary Question: What are the growth dynamics in the health division? - Management noted that growth in Colombia is driven by retail channels and customer affiliations, while Ecuador's growth is impacted by political and economic factors [16] Question: Can you elaborate on OXXO's same-store sales and average ticket increase? - Management confirmed that the increase in average ticket size is a consistent trend, driven by a broader product offering and recovering traffic [20][54] Question: What is the status of FEMSA Forward and Envoy negotiations? - Management stated that they are on track with FEMSA Forward and are exploring strategic alternatives for Envoy Solutions, with positive market conditions aiding their progress [24][70] Question: How does the company view cash returns to shareholders? - Management indicated that capital allocation decisions will be made with a focus on maximizing returns, considering share buybacks and dividends as potential options [36][70] Question: What are the plans for expanding the Bara format? - Management expressed strong ambitions for accelerating store openings in the Bara format, while also focusing on organic growth opportunities [39][66]