Coca-Cola FEMSA(KOF) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated total revenues grew 7.2% to reach MXN 61.4 billion, driven mainly by volume growth, with a 16.9% increase when excluding currency translation effects [6][31] - Operating income increased 11.9% to MXN 8.6 billion, with an operating margin expansion of 50 basis points [7] - EBITDA grew 7.8% to MXN 11.4 billion, resulting in an EBITDA margin of 18.6% [7][58] - Controlling net income increased 6.5% to MXN 4.9 billion, with earnings per share of MXN 0.29 [31] Business Line Data and Key Metrics Changes - Sparkling beverage volumes grew 4%, while the non-caloric portfolio, led by Coca Cola Sin Azúca, grew 14.3% [6][8] - In Mexico and Central America, volumes increased 8.9%, while excluding the integration of Cristal's bulk water business, volumes increased 6.6% [12] - South America division revenues declined 2.2% due to unfavorable currency translation effects, but comparable total revenues increased 20.3% when excluding these effects [14] Market Data and Key Metrics Changes - Volume growth was driven mainly by solid performance in key markets such as Mexico, Brazil, and Guatemala [5][19] - In Guatemala, volumes consistently grew in double digits, with over 9,000 new clients added [9] - Brazil's non-caloric portfolio grew 32%, with energy and water categories consolidating market leadership [53] Company Strategy and Development Direction - The company is investing significantly in digital capacity and technology to become the preferred B2B platform in its market [4] - Strategic priorities have been set to accelerate growth in core business and improve customer experience [4][55] - The company aims for sustainable growth and plans to price in line with inflation to recover competitiveness [113] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving objectives for 2023, with positive momentum entering the second half of the year [10][11] - The competitive position in Mexico is stabilizing, with expectations of slight gains by year-end [36] - Management remains bullish on growth prospects in Colombia and Guatemala, despite macroeconomic challenges [38] Other Important Information - The company achieved over $1 billion in digital sales in the first half of the year, with Mexico contributing approximately$360 million [52][103] - The Juntos+ platform has seen significant uptake, with about 30% of orders in traditional trade now digital [8][89] Q&A Session All Questions and Answers Question: Can you discuss the impressive growth in Guatemala and what strategies are being implemented? - Management highlighted that Guatemala is a profitable market with double-digit growth, focusing on fundamentals and expanding infrastructure to meet demand [9][66] Question: What is the outlook for demand in Mexico, especially regarding the impact of peso appreciation? - Management reported strong volume growth in Mexico, with no signs of slowdown, and positive inflows due to nearshoring [44] Question: How is the Juntos+ platform improving customer experience? - The platform allows clients to place orders at their convenience, leading to larger order sizes and increased frequency [49][134] Question: What are the synergies being explored with FEMSA? - Management mentioned collaboration on the Juntos+ platform and loyalty programs, aiming to enhance customer engagement [45][138] Question: How is the company managing labor expenses and their impact on margins? - Management acknowledged rising labor costs but emphasized maintaining competitive pricing and operational efficiencies [127]