2 May 2012

FEMSA Delivers Solid Start to 2012

Wednesday, 05/02/2012, 7:57:41 am

Monterrey, Mexico, May 2, 2012 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the first quarter of 2012 under International Financial Reporting Standards (IFRS). First Quarter 2012 Highlights:

  • FEMSA consolidated total revenues and income from operations grew 25.2% and 14.4%, respectively, compared to the first quarter of 2011, reflecting solid results at Coca-Cola FEMSA and FEMSA Comercio. On an organic basis total revenues and income from operations grew 20.3% and 10.1% respectively.
  • Coca-Cola FEMSA total revenues and income from operations increased 29.7% and 13.0%, respectively, compared to the first quarter of 2011. On an organic basis total revenues and income from operations grew 21.6% and 7.9% respectively.
  • FEMSA Comercio achieved total revenues growth of 18.1% and income from operations growth of 27.4%, compared to the first quarter of 2011, driven by new store openings and 8.0% growth in same-store sales.

    José Antonio Fernández Carbajal, Chairman and CEO of FEMSA, commented: “We started the year with a good amount of momentum carrying over from last year. FEMSA Comercio continued on a path of robust growth particularly in like-for-like sales, with solid profitability, as we continued to make progress in our understanding of consumer needs. Coca-Cola FEMSA, for its part, delivered strong top line growth tempered by some raw material pressure, as well as the front-loaded costs and expenses related to the integration of the new territories in Mexico and the pursuit of synergies. On that subject, we are encouraged by our initial progress and by the upside bias that we see in the synergy potential.

    This year, as usual, will not be without its share of challenges, but also, its share of opportunities. We welcome you aboard for the ride.”

    FEMSA Consolidated

    Total revenues increased 25.2% compared to 1Q11 to Ps. 53.746 billion in 1Q12. Coca-Cola FEMSA and FEMSA Comercio drove the incremental consolidated revenues. On an organic basis total revenues increased 20.3%.

    Gross profit increased 26.3% compared to 1Q11 to Ps. 21.935 billion in 1Q12. Gross margin increased 30 basis points compared to the same period in 2011 to 40.8% of total revenues, driven by FEMSA Comercio.

    Income from operations increased 14.4% to Ps. 5.213 billion in 1Q12 as compared to the same period in 2011. On an organic basis income from operations increased 10.1%.

    Consolidated operating margin decreased 90 basis points compared to 1Q11 to 9.7% of total revenues, mainly due to raw material-driven cost pressures at Coca-Cola FEMSA.

    The effective income tax rate was 31.7% in 1Q12 compared to 33.0% in 1Q11. Net consolidated income increased 13.0% compared to 1Q11 to Ps. 3.748 billion in 1Q12, primarily as a result of growth in FEMSA’s income from operations and the gain derived from FEMSA’s 20% participation in Heineken’s 1Q12 net income, versus the figure reported for 1Q11. These factors more than compensated the increase in integral result of financing, which was due mostly to a higher foreign exchange non-cash loss resulting from the sequential appreciation of the Mexican Peso and its impact on the dollar-denominated portion of our cash balance.

    Net majority income for 1Q12 was Ps. 0.65 per FEMSA Unit1. Net majority income per FEMSA ADS was US$ 0.51 for the first quarter of 2012.

    Capital expenditures increased to Ps. 2.141 billion in 1Q12 over a low comparable base, reflecting incremental investments at Coca-Cola FEMSA including the deployment of coolers, particularly in Mexico.

    Our consolidated balance sheet as of March 31, 2012, recorded a cash balance of Ps. 27.249 billion (US$ 2.127 billion), an increase of Ps. 79 million (US$ 6.2 million) compared to December 2011. Short-term debt was Ps. 2.248 billion (US$ 175.5 million), while long-term debt was Ps. 22.371 billion (US$ 1.746 billion). Our consolidated net cash balance was Ps. 2.630 billion (US$ 205.3 million).

    Soft Drinks – Coca-Cola FEMSA

    Coca-Cola FEMSA’s financial results and discussion thereof are incorporated by reference from Coca-Cola FEMSA’s press release, which is attached to this press release or may be accessed by visiting www.coca-colafemsa.com.

    FEMSA Comercio

    Total revenues increased 18.1% compared to 1Q11 to Ps. 19.033 billion in 1Q12, mainly driven by the opening of 138 net new stores in the quarter reaching 1,078 total net new store openings for the last twelve months. As of March 31, 2012, FEMSA Comercio had a total of 9,699 convenience stores. Same-store sales increased an average of 8.0% for the first quarter of 2012 over 1Q11, reflecting a 6.0% increase in store traffic and a 1.9% increase in average customer ticket.

    1 FEMSA Units consist of FEMSA BD Units and FEMSA B Units. Each FEMSA BD Unit is comprised of one Series B Share, two Series D-B Shares and two Series D-L Shares. Each FEMSA B Unit is comprised of five Series B Shares. The number of FEMSA Units outstanding as of March 31, 2012 was 3,578,226,270, equivalent to the total number of FEMSA Shares outstanding as of the same date, divided by 5.

    Gross profit increased by 21.7% in 1Q12 compared to 1Q11, resulting in a 90 basis point gross margin expansion to 32.3% of total revenues. This increase reflects (i) a positive mix shift due to the growth of higher margin categories, and (ii) a more effective collaboration and execution with our key supplier partners combined with a more efficient use of promotion-related marketing resources.

    Income from operations increased 27.4% over 1Q11 to Ps. 800 million in 1Q12. Selling and Administrative expenses increased 21.5% to Ps. 5.383 billion in line with the recent trend, largely driven by the growing number of stores as well as by incremental expenses relating to, among other things: (i) an increase in marketing programs to support our consumer need-driven initiatives, (ii) a rise in electricity tariffs, and (iii) the continued strengthening of FEMSA Comercio’s organizational structure. Operating margin expanded 30 basis points compared to 1Q11, to 4.2% of total revenues in 1Q12.

    Recent Developments

    • On March 30, 2012, FEMSA reported its financial information under International Financial Reporting Standards (IFRS). The purpose of this exercise was to provide investors and other market participants with a set of quarterly and full year information reflecting the application of International Financial Reporting Standards. This data set also constituted a comparable basis for future reporting periods.


    Our First Quarter of 2012 Conference Call will be held on: Wednesday May 2, 2012, 11:00 AM Eastern Time (10:00 AM Mexico City Time). To participate in the conference call, please dial: Domestic US: (877) 795-3647 International: (719) 325-4806, Conference Id: 4214309. The conference call will be webcast live through streaming audio. For details please visit www.femsa.com/investor. If you are unable to participate live, the conference call audio will be available on http://ir.FEMSA.com/results.cfm.

    FEMSA is a leading company that participates in the non-alcoholic beverage industry through Coca-Cola FEMSA, the largest independent bottler of Coca-Cola products in the world in terms of sales volume; in the retail industry through FEMSA Comercio, operating the largest and fastest-growing chain of convenience stores in Latin America, and in the beer industry, through its ownership of the second largest equity stake in Heineken, one of the world’s leading brewers with operations in over 70 countries.

    The translations of Mexican pesos into US dollars are included solely for the convenience of the reader, using the noon day buying rate for pesos as published by the Federal Reserve Bank of New York at March 30, 2012, which was 12.8115 Mexican pesos per US dollar.


    This report may contain certain forward-looking statements concerning our future performance that should be considered as good faith estimates made by us. These forward-looking statements reflect management’s expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact our actual performance.

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