Coca-Cola FEMSA(US:KOF)2024-10-25 19:02Financial Data and Key Metrics Changes - Consolidated revenues for Q3 2024 grew by 10.7% to reach MXN 69.6 billion, driven by revenue management initiatives and favorable mix effects [6][20] - Gross profit increased by 11.3% to MXN 32.1 billion, leading to a gross margin expansion of 20 basis points to 46.1% [6][7] - Operating income rose by 13.9% to MXN 9.6 billion, with an operating margin expansion of 30 basis points to 13.8% [7][20] - Adjusted EBITDA increased by 18.4% to MXN 14 billion, with an adjusted EBITDA margin expansion of 130 basis points to 20.1% [7][20] - Majority net income increased by 8.9% to MXN 5.9 billion, driven mainly by operating income growth [8] Business Line Data and Key Metrics Changes - In Mexico, volumes declined by 1.5%, impacted by unfavorable weather and lower consumption patterns [8][10] - In Central America, volumes in Guatemala increased by 7.5%, driven by a young and growing population [11][12] - In Brazil, volumes grew by 6.3%, supported by favorable weather and improving macro fundamentals [13][21] - In Colombia, volumes contracted by 4% due to declining consumer confidence and household expenditures [17][21] - In Argentina, volumes remained stable compared to the previous year, with a gradual recovery expected [18][21] Market Data and Key Metrics Changes - Total consolidated volumes increased by 0.8% to 1.04 billion unit cases, driven mainly by Brazil, Guatemala, and Central America [5][6] - Sparkling beverage volumes grew by 2.8%, while still beverages increased by 4.9% [5][6] - In South America, total revenues increased by 13.6% to MXN 27.1 billion, driven by volume growth and favorable mix [21] Company Strategy and Development Direction - The company remains committed to removing infrastructure bottlenecks to enable sustainable long-term growth, increasing CapEx investments, and optimizing warehouse layouts [4][10] - Digital initiatives continue to progress, with Juntos+ reaching 1.2 million active users and a 21% increase in enrolled clients for the loyalty program [3][4] - The company plans to expand manufacturing capacity by 4% in 2024 and increase warehouse capacity by over 25% compared to 2023 [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in growth prospects in Mexico, driven by increases in disposable income and infrastructure projects [10][50] - The company anticipates a gradual recovery in Argentina, with a focus on maintaining customer base and affordability [18][51] - In Colombia, management expects sequential improvement in the fourth quarter following a challenging third quarter [36][50] Other Important Information - The company achieved a water use efficiency ratio of 1.36 liters per liter of beverage produced, a 21% improvement compared to 2016 [24] - The impact of Hurricane Otis in Guerrero was recognized with insurance claim payments of approximately MXN 340 million [7][20] Q&A Session Summary Question: Insights on Brazil's demand and plant ramp-up - Management confirmed that the Porto Alegre plant's closure impacted capacity, but as it ramps up, profitability is expected to improve [25][26] Question: Update on pilots and multi-category initiatives - Progress is being made, with multi-category revenues growing and expectations to reach 5% of revenues excluding beer [27] Question: Gross margin contraction in South America - Management explained that increased sweetener costs and promotional activities in Colombia affected gross margins, but improvements are expected moving forward [29] Question: Impact of Porto Alegre plant closure - The impact this quarter was MXN 200 million, with expectations for higher expenses in the fourth quarter due to high season demand [35] Question: Outlook for Colombia - Management expects stabilization and sequential improvement in Colombia's performance in the upcoming quarters [36] Question: Digital platform's role in pricing - The company utilizes advanced analytics for pricing strategies, allowing for more targeted promotions and improved competitive positioning [40][41] Question: Strategy in Argentina - The focus remains on volume performance to gain scale, with a gradual recovery expected [58][59] Question: Differences in EBIT and EBITDA margin expansion - Management noted that non-cash charges and currency depreciation affected EBIT margins more than EBITDA margins [60][61]