Friday, 02/25/2011, 9:54:00 am
Monterrey, Mexico, February 25, 2011 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the fourth quarter and full year 2010.
Fourth Quarter 2010 Highlights:
• FEMSA comparable consolidated total revenues and income from operations grew 3.8% and 7.5%, respectively, compared to the fourth quarter of 2009.
• Coca-Cola FEMSA income from operations increased 5.2%. Solid results from the Latincentro division drove these results.
• FEMSA Comercio achieved total revenues growth of 18.9% and income from operations increased 19.5%.
2010 Full Year Highlights:
• FEMSA comparable consolidated total revenues and income from operations grew 5.9% and 6.6%, respectively, compared to 2009, against a backdrop of soft consumer demand. FEMSA Comercio and the Mercosur division of Coca-Cola FEMSA were the main drivers of this performance. Excluding one-time Heineken transaction-related expenses, comparable consolidated income from operations would have grown 8.7%.
• Coca-Cola FEMSA income from operations increased 7.9%. Strong growth in the Mercosur and Latincentro divisions drove these results.
• FEMSA Comercio continued its pace of strong floor space growth by opening 1,092 net new stores in 2010. Income from operations increased 16.7%.
• Ordinary dividend of Ps. 4.6 billion proposed by FEMSA’s Board of Directors, to be paid in 2011 subject to approval at the annual shareholders meeting in March 2011, representing an increase of 76.9 % over the prior year and 183.9 % over the dividend paid in 2009.
José Antonio Fernández Carbajal, Chairman and CEO of FEMSA, commented: “We were able to wrap up an exciting 2010 on a solid note. This was a unique year for FEMSA, one that saw us take big steps in the strategic journey of our Company. From the signing of our agreement with Heineken in January, to the closing of the transaction in late April –making us the second largest shareholder in Heineken–, to the tremendous work carried out by all those involved in making sure a smooth transition took place, and last but certainly not least, to the current process of strategic analysis that we are thoroughly carrying out as we plot the future path for FEMSA. And all the while, having our operators navigate a challenging consumer environment across our territories to deliver yet another strong set of results.
On the operational front, we are encouraged by what seems to be a fledgling sequential improvement in consumer sentiment in Mexico, evidenced by the strong performance of FEMSA Comercio during the fourth quarter. At Coca-Cola FEMSA, we were able to improve our profitability in 2010 even in the face of tough demand dynamics across markets. Certainly, challenges abound, but more than ever we are optimistic. Our capabilities, our team, and our financial flexibility put us in an enviable position to pursue and capture the many growth opportunities that lie ahead of us.”
On April 30, 2010, FEMSA announced the closing of the strategic transaction pursuant to which FEMSA agreed to exchange 100% of its beer operations for a 20% economic interest in the Heineken Group (“the transaction”). For more information regarding this acquisition, please refer to the transaction filings available at www.femsa.com/investor. FEMSA’s consolidated results for the fourth quarter and for the full year of 2010 reflect the transaction effects and are presented on a comparable basis.
Comparable total revenues increased 3.8% compared to 4Q09 to Ps. 45.664 billion. FEMSA Comercio accounted for the majority of the incremental consolidated revenues.
For the full year of 2010, consolidated total revenues increased 5.9% to Ps. 169.702 billion. This growth resulted mainly from double-digit growth at FEMSA Comercio, and a moderate increase at Coca-Cola FEMSA.
Comparable gross profit increased 1.5% compared to 4Q09 to Ps. 19.464 billion in 4Q10 driven by FEMSA Comercio. Gross margin decreased 100 basis points compared to the same period in 2009 to 42.6% of total revenues, as the faster growth of lower-margin FEMSA Comercio tends to compress FEMSA’s consolidated margins over time.
For the full year of 2010, comparable gross profit increased 4.5% to Ps. 70.970 billion. Gross margin decreased 60 basis points compared to the same period in 2009 to 41.8% of total revenues. FEMSA Comercio’s gross profit improvement partially offset raw-material-driven cost pressures at Coca-Cola FEMSA.
Comparable income from operations increased 7.5% to Ps. 7.115 billion in 4Q10 as compared to the same period in 2009. Consolidated operating margin increased 60 basis points compared to 4Q09 to 15.6% of total revenues, mainly driven by operating margin improvement at Coca-Cola FEMSA.
For the full year of 2010, comparable income from operations increased 6.6% to Ps. 22.529 billion. Excluding one-time Heineken transaction-related expenses, comparable consolidated income from operations would have grown 8.7% in that period. Our consolidated operating margin in 2010 was 13.3% as a percentage of total revenues, an expansion of 10 basis points as compared to the same period of 2009.
Net income from continuing operations increased 61.2% to Ps. 6.503 billion in 4Q10 compared to 4Q09, reflecting the fact that this line includes FEMSA’s implied 20% participation in Heineken’s fourth quarter 2010 net income. The figures also reflect growth in comparable income from operations as well as a shift from other expenses in 4Q09 to other income in 4Q10. This shift was largely driven by the net effect of non-recurring items, including income from the sale of our flexible packaging business, and the restructuring of certain compensation plans. The effective income tax rate on continuing operations was 14% in 4Q10 compared to 30% in 4Q09.
For the full year of 2010, net income from continuing operations increased 52.2% to Ps. 17.961 billion compared to the same period of 2009, primarily as a result of the combination of (i) the inclusion of FEMSA’s 20% participation in the last eight months of Heineken’s 2010 net income, (ii) growth in income from operations, and (iii) a reduction in the other expenses line. The full-year effective income tax rate on continuing operations was 24%.
Net consolidated income increased 6.4% compared to 4Q09 to Ps. 6.503 billion in 4Q10, reflecting the double-digit increase in FEMSA’s net income from continuing operations. Net majority income for 4Q10 resulted in Ps. 1.38 per FEMSA Unit . Net majority income per FEMSA ADS was US$ 1.11 for the quarter. For the year of 2010, net majority income per FEMSA Unit1 was Ps. 11.25 (US$ 9.08 per ADS).
Capital expenditures increased to Ps. 3.771 billion in 4Q10, driven by higher capacity-related investments at Coca-Cola FEMSA and incremental investments in FEMSA Comercio related mainly to store expansion. For the full year of 2010, capital expenditures increased to Ps. 11.171 billion, for the reasons described above.
Our consolidated balance sheet as of December 31, 2010, recorded a cash balance of Ps. 27.163 billion (US$ 2.194 billion), an increase of Ps. 10.542 billion (US$ 851.4 million) compared to the same period in 2009. Short-term debt was Ps. 3.303 billion (US$ 266.7 million), while long-term debt was Ps. 21.510 billion (US$ 1.737 billion). Our consolidated net cash balance was Ps. 2.350 billion (US$ 189.8 million).
Soft Drinks – Coca-Cola FEMSA
Coca-Cola FEMSA’s financial results and discussion are incorporated by reference from Coca-Cola FEMSA’s press release, which is attached to this press release or visit www.coca-colafemsa.com.
Total revenues increased 18.9% compared to 4Q09 to Ps. 16.781 billion in 4Q10 mainly driven by the opening of 415 net new stores in the quarter, representing a record number of openings in a quarter in the Company’s history, reaching 1,092 total net new store openings in the year. As of December 31, 2010, FEMSA Comercio had a total of 8,426 convenience stores, above target relative to the objective for 2010. Same-store sales increased an average of 7.9% for the quarter over 4Q09, reflecting a 5.4% increase in store traffic and a 2.4% increase in average customer ticket. During the quarter, the same-store sales, ticket and traffic dynamics continued to reflect a small effect from the mix shift from physical prepaid wireless air-time cards to the sale of electronic air-time, for which only the margin is recorded, rather than the full amount of the electronic recharge. On a comparable basis excluding this change, the average ticket would have grown slightly more than the reported figure.
For the full year of 2010, total revenues increased 16.3% to Ps. 62.259 billion. FEMSA Comercio’s same-store sales increased an average of 5.2%, driven by a 3.9% increase in store traffic, which still reflects a small effect from the mix shift from physical prepaid wireless air-time cards to the sale of electronic air-time, as described above.
Gross profit increased by 18.2% in 4Q10 compared to 4Q09, resulting in a 20 basis point gross margin contraction to 36.7% of total revenues, driven mainly by a change in the structure of commercial terms for certain supplier partners. While the impact of these terms used to be skewed towards the fourth quarter, it is now more evenly spread throughout the year.
For the full year of 2010, gross margin expanded by 70 basis points to 33.8% of total revenues. This increase reflects a positive mix shift due to the growth of higher margin categories, a more effective collaboration and execution with our key supplier partners combined with a more efficient use of promotion-related marketing resources, and to a lesser extent, the continued mix shift towards electronic air-time recharges as described above.
Income from operations increased 19.5% over 4Q09 to Ps. 1.978 billion in 4Q10. Operating expenses increased 17.6% to Ps. 4.179 billion, below revenue growth. Operating expense growth was contained during the fourth quarter, allowing the operating margin to expand 10 basis points compared to 4Q09, which represents 11.8% of total revenues.
For the full year of 2010, income from operations increased 16.7% to Ps. 5.200 billion. Operating expenses increased 19.4% to Ps. 15.839 billion, largely driven by the growing number of stores as well as by incremental expenses such as (i) higher utility tariffs at the store level and (ii) the strengthening of FEMSA Comercio’s organizational structure, mainly IT-related, which was deferred in 2009 in response to the challenging economic environment that prevailed in Mexico.
CONFERENCE CALL INFORMATION:
Our Fourth Quarter and Full Year 2010 Conference Call will be held on: Friday February 25, 2011, 11:00 AM Eastern Time (10:00 AM Mexico City Time). To participate in the conference call, please dial: Domestic US: (877) 573-3228 International: (706) 679-0077, Conference Id 43048342. 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 December 31, 2010, which was 12.3825 Mexican pesos per US dollar.
FORWARD LOOKING STATEMENTS
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.
In order to see the complete version of this press release which includes financial charts, we invite you to download our PDF version which you can find in the upper part of this press relase or by going to the Investor Relations section.