Monterrey, Mexico, July 27, 2023 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) (NYSE: FMX; BMV: FEMSAUBD, FEMSAUB) announced today its operational and financial results for the second quarter of 2023.
- FEMSA: Total Consolidated Revenues grew 18.3% against 2Q22.
- FEMSA Retail: Proximity Americas total Revenues increased 19.9% against 2Q22.
- DIGITAL: Spin by OXXO had 5.7 million active users while Spin Premia had 15.8 million active loyalty users and an average tender of 24.0%.
- COCA-COLA FEMSA: Total revenues grew 7.2% against 2Q22.
José Antonio Fernandez Carbajal, FEMSA’s Chief Executive Officer, commented:
“It is a great privilege to lead this amazing company again. It is also a challenge that I embrace, particularly as we find ourselves in the process of implementing our transformational FEMSA Forward strategy, and as we pursue our ambitious long-range growth plans for all our core business units, setting the course for sustained, long-term value creation.
The second quarter results announced today represent an example of the organic growth potential we have before us. Among the highlights, Proximity Americas increased revenues by 20 percent, again driven by strong same-store sales trends at OXXO and reflecting an accelerated store expansion. In Europe, Valora reported solid top line growth, while Health revenues were stable, reflecting a challenging comparison base in Chile as well as currency headwinds. For its part, Coca-Cola FEMSA again delivered a strong performance, while Envoy Solutions showed sustained revenue growth driven by recent acquisitions. On the Digital side, we continued to add users at a rapid pace, with active users growing more than one hundred percent year-over-year.
I want to extend my gratitude to our hardworking team who continue to find a way to post strong results, putting us on the right path to meet or exceed our long-term aspirations.”
2Q23 Financial Summary
Total revenues increased 18.3% in 2Q23 compared to 2Q22, driven by growth across our business units. On an organic basis, total revenues increased 9.5%.
Gross profit increased 20.1%. Gross margin expanded 50 basis points, reflecting the consolidation of Proximity Europe, as well as margin expansions at Coca-Cola FEMSA, Envoy Solutions, and FEMSA Health. This was partially offset by a margin contraction at Fuel and Proximity Americas.
Income from operations increased 8.0%. On an organic basis, income from operations increased 4.5%. Consolidated operating margin decreased 80 basis points to 8.4% of total revenues, reflecting margin expansion at Coca-Cola FEMSA, offset by margin contractions at Proximity Americas, Health, Fuel, and Envoy Solutions, as well as the consolidation of Proximity Europe.
Our effective income tax rate was 30.0% in 2Q23 compared to 38.0% in 2Q22. Our income tax provision was Ps. 5,618 million in 2Q23.
Net consolidated income was Ps. 8,926 million, reflecting: i) higher income from operations; ii) a Ps. 9,410 other non-operating income, mostly reflecting the divestment of FEMSA’s minority stake in Jetro Restaurant Depot; and iii) a decrease in net interest expenses during the quarter. This was offset by: i) a non-cash foreign exchange loss of Ps. 6,456, related to FEMSA’s U.S. dollar-denominated cash position as impacted by the appreciation of the Mexican peso and, ii) a net loss of discontinued operations of Ps. 3,953 driven by the market value fluctuation of the Heineken shares underlying FEMSA’s outstanding exchangeable bond.
Net majority income was Ps. 1.72 per FEMSA Unit and US$1.00 per FEMSA ADS.
Capital expenditures amounted to Ps. 8,375 million, driven by ongoing investment activities across our business units.
RESULTS FOR THE FIRST SIX MONTHS OF 2023
Total revenues increased 19.9%. On an organic basis, total revenues increased 10.8% reflecting growth across most of our operations.
Gross profit increased 21.3%. Gross margin increased 40 basis points to 37.4% of total revenues, reflecting gross margin expansion at Coca-Cola FEMSA, Health and Envoy Solutions as well as the consolidation of Proximity Europe, offset by margin contraction at Proximity Americas and Fuel.
Income from operations increased 6.8%. On an organic basis, income from operations increased 3.8%. Our consolidated operating margin decreased 90 basis points to 7.7% of total revenues, reflecting margin expansions at Coca-Cola FEMSA, Fuel and Envoy Solutions, offset by margin contractions at Proximity Americas and Health, as well as by the consolidation of Proximity Europe.
Net consolidated income increased to Ps. 59,252 million, reflecting; i) a Ps. 36,653 million net income from discontinued operations, reflecting the accounting re-measurement from historical cost to fair value of FEMSA’s investment in Heineken, as well as the divestiture of this investment as part of the FEMSA Forward strategy announced on February 15, 2023, net of taxes; ii) a Ps. 10,275 million non-cash financial product that mostly reflects the repurchase of US$ 1.7 billion of FEMSA’s outstanding debt at favorable price levels during 1Q23, also in connection with FEMSA Forward; and iii) a Ps. 9,160 other non-operating income, mostly reflecting the divestment of FEMSA’s minority stake in Jetro Restaurant Depot. This was offset by a non-cash foreign exchange loss of Ps. 8,999, related to FEMSA’s U.S. dollar-denominated cash position as impacted by the appreciation of the Mexican peso.
Net majority income per FEMSA Unit was Ps.15.16 (US$8.84 per ADS).
Capital expenditures amounted to Ps. 13,531 million, reflecting the reactivation of ongoing investment activities at most of our business units.
- On May 30, 2023, FEMSA announced the offering by the Company and its wholly-owned subsidiaries Compañía Internacional de Bebidas, S.A. de C.V. and Grupo Industrial Emprex, S. de R.L. de C.V. of existing issued ordinary shares of both Heineken N.V. and Heineken Holding N.V. (together, the “Heineken Group”) in the total amount of approximately EUR 3.3 billion (approximately 5.9% of the combined interest in the Heineken Group) (the “Equity Offering”). The Company also announced a tap issuance of euro denominated senior unsecured bonds in the aggregate principal amount of up to EUR 250 million (the “New Bonds”), exchangeable into ordinary shares of Heineken Holding N.V. (the “Exchangeable Offering” and together with the Equity Offering, the “Offering”). The New Bonds will be consolidated and form a single series with the Company’s EUR 500 million 2.625% senior unsecured Exchangeable Bonds due 2026, originally issued on 24 February 2023 (the “Original Bonds” and together with the New Bonds, the “Bonds”) with effect from on or about 18 July 2023 (the “Consolidation Date”).
- On May 31, 2023, FEMSA announced the pricing of the sale by the Company and its wholly-owned subsidiaries Compañía Internacional de Bebidas, S.A. de C.V. and Grupo Industrial Emprex, S. de R.L. de C.V. of its entire holding of existing issued ordinary shares of both Heineken N.V. and Heineken Holding N.V. (together, the “Heineken Group”) by way of an accelerated book build of shares in the total amount of EUR 3.3 billion (approximately 6.0% of the combined interest in the Heineken Group) (the “Equity Offering”) as well as a bilateral sale of additional shares to Heineken N.V., except for any shares retained underlying FEMSA’s outstanding EUR 500 million 2.625% senior unsecured Exchangeable Bonds due 2026 (the “Bonds”), exchangeable into ordinary shares of Heineken Holding N.V. Given the strength of demand seen for the Equity Offering, the Company has decided not to proceed with the concurrent tap issuance of its outstanding Bonds announced on May 30, 2023.
- On May 31, 2023, FEMSA announced that consistent with its FEMSA Forward strategy as communicated on February 15, 2023, it has entered into a definitive agreement to divest its minority investment in Jetro Restaurant Depot and related entities (“JRD”). Subject to customary closing conditions, FEMSA will receive total cash consideration of US$1,400 million, with approximately US$467 million payable on closing in the second quarter of 2023, and the remainder payable over two years.
- On July 10, 2023, FEMSA announced that Daniel Rodríguez Cofré, after consulting with his family and doctors, would step down from his role as CEO, to focus on his health and treatment of a previously announced colon cancer diagnosis. Until a replacement is appointed, José Antonio Fernández Carbajal, Executive Chairman and former CEO of FEMSA, will serve as acting Chief Executive Officer on an interim basis, with the continued support of FEMSA’s senior leadership team and the CEOs of the business units.
FEMSA is a company that creates economic and social value through companies and institutions and strives to be the best employer and neighbor to the communities in which it operates. It participates in the retail industry through a Proximity Americas Division operating OXXO, a small-format store chain, and other related retail formats, and Proximity Europe which includes Valora, our European retail unit which operates convenience and foodvenience formats. In the retail industry it also participates though a Health Division, which includes drugstores and related activities and Digital@FEMSA, which includes Spin by OXXO and Spin Premia, among other digital financial services initiatives. In the beverage industry, it participates through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the world by volume. FEMSA also participates in the logistics and distribution industry through its Strategic Business Unit, which additionally provides point-of-sale refrigeration and plastic solutions to its business units and third-party clients. Across its business units, FEMSA has more than 350,000 employees in 18 countries. FEMSA is a member of the Dow Jones Sustainability MILA Pacific Alliance, the FTSE4Good Emerging Index and the Mexican Stock Exchange Sustainability Index: S&P/BMV Total México ESG, among other indexes that evaluate its sustainability performance.
***The translations of Mexican pesos into US dollars are included solely for the convenience of the reader, using the noon buying rate for Mexican pesos as published by the Federal Reserve Bank of New York on June 30, 2023, which was 17.1439 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.