Thursday, 04/28/2011, 9:32:30 am
First Quarter 2011 Highlights:
• FEMSA comparable consolidated total revenues and income from operations grew 12.5% and 9.4%, respectively, compared to the first quarter of 2010, reflecting solid results at Coca-Cola FEMSA and FEMSA Comercio.
• Coca-Cola FEMSA total revenues and income from operations increased 9.5% and 10.4%, respectively. Double-digit income from operations growth in the Mexico and Mercosur divisions drove these results.
• FEMSA Comercio achieved total revenues growth of 19.5% aided by the opening of over 1,100 net new stores in the last twelve months, as well as robust same-store sales during the quarter. Income from operations increased 25.5%.
José Antonio Fernández Carbajal, Chairman and CEO of FEMSA, commented: “We are off to a good start in 2011. FEMSA Comercio delivered another strong quarter, showing good progress in terms of new store openings, revenue growth and profitability. And Coca-Cola FEMSA also had a promising start to the year, with Mexico showing very strong trends and Mercosur continuing with good momentum. We also continue to benefit from the strong profitability being achieved at Heineken. And so, we are optimistic that this year will continue to be an exciting and rewarding one for FEMSA.”
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 first quarter of 2011 reflect the transaction effects and are presented on a comparable basis.
Comparable total revenues increased 12.5% compared to 1Q10 to Ps. 42.892 billion in 1Q11. FEMSA Comercio and Coca-Cola FEMSA drove the incremental consolidated revenues.
Comparable gross profit increased 12.1% compared to 1Q10 to Ps. 17.357 billion in 1Q11 driven by FEMSA Comercio and Coca-Cola FEMSA. Gross margin decreased 10 basis points compared to the same period in 2010 to 40.5% of total revenues, as the faster growth of lower-margin FEMSA Comercio tends to compress FEMSA’s consolidated margins over time.
Comparable income from operations increased 9.4% to Ps. 4.772 billion in 1Q11 as compared to the same period in 2010. Consolidated operating margin decreased 30 basis points compared to 1Q10 to 11.1% of total revenues, reflecting (i) the faster growth of lower-margin FEMSA Comercio that tends to compress FEMSA’s consolidated margins over time and (ii) lower operating income generation resulting from the sale of the Mundet brand and our flexible packaging business in the second half of 2010.
Net income from continuing operations increased 28.7% to Ps. 3.348 billion in 1Q11 compared to 1Q10, reflecting the fact that this line includes FEMSA’s 20% participation in Heineken’s first quarter 2011 net income. The figures also reflect growth in comparable income from operations, as described above. The effective income tax rate on continuing operations was 25.9% in 1Q11 compared to 30.5% in 1Q10.
Net consolidated income increased 8.3% compared to 1Q10 to Ps. 3.348 billion in 1Q11, reflecting the doubledigit increase in FEMSA’s net income from continuing operations. Net majority income for 1Q11 resulted in Ps. 0.61 per FEMSA Unit1. Net majority income per FEMSA ADS was US$ 0.51 for the quarter.
Capital expenditures decreased to Ps. 1.266 billion in 1Q11 as Coca-Cola FEMSA deployed a lower amount of investment in capacity-related projects than in the comparable quarter of last year. As the year progresses we expect the pace of investment to pick up.
Our consolidated balance sheet as of March 31, 2011, recorded a cash balance of Ps. 27.511 billion (US$ 2.309 billion), an increase of Ps. 8.550 billion (US$ 717.5 million) compared to the same period in 2010. Shortterm debt was Ps. 6.745 billion (US$ 566.0 million), while long-term debt was Ps. 17.766 billion (US$ 1.491 billion). Our consolidated net cash balance was Ps. 3.000 billion (US$ 251.7 million).
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 19.5% compared to 1Q10 to Ps. 16.110 billion in 1Q11 mainly driven by the opening of 195 net new stores in the quarter, reaching 1,129 total net new store openings in the last twelve months. As of March 31, 2011, FEMSA Comercio had a total of 8,621 convenience stores. Same-store sales increased an average of 9.0% for the quarter over 1Q10, reflecting a 5.2% increase in store traffic and a 3.7% increase in average customer ticket.
Gross profit increased by 21.1% in 1Q11 compared to 1Q10, resulting in a 40 basis point gross margin expansion to 31.4% of total revenues. This increase reflects (i) a positive mix shift due to the growth of higher margin categories, (ii) a more effective collaboration and execution with our key supplier partners combined with a more efficient use of promotion-related marketing resources, and (iii) 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.
Income from operations increased 25.5% over 1Q10 to Ps. 777 billion in 1Q11. Operating expenses increased 20.4% to Ps. 4.283 billion, largely driven by the growing number of stores as well as by incremental expenses such as the strengthening of FEMSA Comercio’s organizational structure, mainly IT-related. Operating expense growth was contained during the first quarter, allowing the operating margin to expand 20 basis points compared to 1Q10, reaching 4.8% of total revenues.
CONFERENCE CALL INFORMATION:
Our First Quarter Conference Call will be held on: Thursday April 28, 2011, 11:00 AM Eastern Time (10:00 AM Mexico City Time). To participate in the conference call, please dial: Domestic US: (800) 659-2056 International: (617) 614-2714, 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 March 31, 2011, which was 11.917 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.