FEMSA(US:FMX)2019-02-28 21:17Financial Data and Key Metrics Changes - Total revenues during Q4 2018 increased by 7.5% and income from operations increased by 2.3% [9] - On an organic basis, total revenues increased by 6% while income from operations decreased by 4.4% [9] - Net income increased significantly due to an easy comparison base from the previous quarter [9] - Net debt decreased by approximately MXN 16 billion to reach MXN 60 billion at the end of December [9] Business Line Data and Key Metrics Changes - Proximity Division: Achieved 11% revenue growth on an organic basis, with same-store sales up 4.5% driven by a 4% increase in average customer ticket [10][11] - Health Division: Revenues increased by 6.1% with same-store sales also up by 4.5% [13] - Fuel Division: Added 20 gas stations, with same-station sales growing by 6.7% and gross margin expanding by 180 basis points [15] Market Data and Key Metrics Changes - Coca-Cola FEMSA reported top-line and volume growth in several markets, particularly in Brazil [6][16] - The consumer environment in Mexico remains resilient, while Brazil shows signs of recovery [17] Company Strategy and Development Direction - The company plans to continue expanding OXXO stores, with expectations of over 1,300 new units in Mexico and approximately 120 new stores in Colombia, Chile, and Peru [18] - The new commercial agreement with global brewers aims to enhance OXXO's value proposition and expand its product offerings [7][20] - The company is optimistic about leveraging its scale and improving profitability through strategic investments and operational efficiencies [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the consumer environment in key markets, despite mixed signals in the microenvironment [17] - The company anticipates stable to slightly expanding operating margins in the Health Division and continued growth in the Fuel Division [22][23] - There is a focus on managing cash handling costs and improving operational efficiencies to enhance profitability [30][31] Other Important Information - The company will report financial information under IFRS 16 starting in Q1 2019, which will change the treatment of leases in financial statements [27] - A proposed ordinary dividend payment of MXN 9.7 million is expected, reflecting a conservative approach to balance sheet management [24] Q&A Session Summary Question: Insights on OXXO results and gross margin expansion - Management highlighted that cash handling has become a significant part of their business, with service revenues now contributing more than merchandising [30] - The gross margin expansion is attributed to supplier leverage and seasonal commercial income [31] Question: Investment appetite in Brazil and capital deployment timeframe - The company is considering investment opportunities in Brazil but noted that market conditions can be expensive [35] Question: Impact of new beer agreements on OXXO revenues - Management indicated that the beer agreements will likely increase sales per store, but specific financial impacts are not disclosed at this stage [36] Question: Operating margin guidance for the Proximity Division - Operating margins are expected to be under pressure, but the new beer agreements could provide some upside [53] Question: Growth in OXXO International and long-term margin expectations - The company closed the year with around 160 stores outside Mexico and aims for aggressive growth, though profitability will take time to align with OXXO Mexico [64][66]