Monterrey, Mexico, February 27, 2013 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the fourth quarter and full year 2012 under International Financial Reporting Standards (“IFRS”).
Fourth Quarter 2012 Highlights:
- FEMSA consolidated total revenues and income from operations grew 11.8% and 24.9%, respectively, compared to the fourth quarter of 2011. On an organic basis total revenues and income from operations grew 9.0% and 22.4%, respectively.
- Coca-Cola FEMSA total revenues and income from operations increased 10.4% and 29.5%, respectively, compared to the fourth quarter of 2011. On an organic basis total revenues and income from operations grew 6.0% and 26.0%, respectively.
- FEMSA Comercio achieved total revenues growth of 15.6% and income from operations growth of 17.0% compared to 2011, driven by new store openings and 7.5% growth in same-store sales.
2012 Full Year Highlights:
- FEMSA consolidated total revenues and income from operations grew 18.2% and 19.4%, respectively, compared to 2011 driven by Coca-Cola FEMSA and FEMSA Comercio. On an organic basis total revenues and income from operations grew 13.2% and 14.8%, respectively.
- Coca-Cola FEMSA total revenues and income from operations increased 19.9% and 19.4%, driven by double-digit growth in both of its operating divisions, including the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico. On an organic basis total revenues and income from operations grew 11.6% and 13.3%, respectively.
- FEMSA Comercio continued its pace of strong floor space growth by opening 1,040 net new stores in 2012. Same-store sales rose 7.7% and income from operations increased 22.7% compared to 2011.
- Ordinary dividend of Ps. 6.684 billion proposed by FEMSA’s Board of Directors, to be paid in 2013 subject to approval at the annual shareholders meeting in March 2013, representing an increase of 7.8% over the dividend paid in the prior year and 45.3% over the dividend paid in 2011.
José Antonio Fernández Carbajal, Chairman and CEO of FEMSA, commented: “2012 was an eventful year for FEMSA. There were a couple of “firsts” that we should talk about: For the first time, Coca-Cola FEMSA is venturing beyond Latin America through the acquisition of a 51% interest in the Coca-Cola bottling operations in the Philippines. And for the first time, FEMSA Comercio entered the drugstore business through the acquisition of a controlling stake in Farmacias Yza in the Southeast of Mexico. These are transactions that fit well into our long-term strategy, and they are enabled by the skills and capabilities that our operators have developed in our core businesses over many years. These are exciting opportunities that we are very keen to pursue.
There were other important news in 2012 that marked a continuation of trends. The transaction with Grupo Yoli in the Mexican state of Guerrero came on the heels of the previous three transactions with Grupo Tampico, CIMSA and Foque. The Coca-Cola System’s acquisition of Santa Clara as an entry into the high-value-added dairy industry in Mexico was a logical next step once we gained some experience in the dairy industry with Estrella Azul in Panama. And at FEMSA Comercio, reaching and surpassing the milestone of 10,000 stores in Mexico was a remarkable achievement. So again, we are executing on the long term strategy, taking focused and consistent steps.
But none of this would be possible or reasonable if it were not for the fact that our core operations, across our markets, continue to grow and perform in very solid fashion driven by our outstanding team. In 2012 our consolidated revenues and income from operations increased by double digits even before considering any acquisitions, and our operating margin was stable in spite of a tough raw material environment at Coca-Cola FEMSA during the first half of the year.
As you can tell, we are excited and optimistic about the year that begins and about the future of our company, even in the face of the many challenges that are always ahead. We hope you come along for the journey.”
Total revenues increased 11.8% compared to 4Q11, to Ps. 63.436 billion in 4Q12. Coca-Cola FEMSA and FEMSA Comercio drove the growth in consolidated revenues. On an organic basis total revenues increased 9.0% compared to 4Q11.
For the full year of 2012, consolidated total revenues increased 18.2% to Ps. 238.309 billion compared to 2011.
On an organic basis, total revenues for 2012 increased 13.2% compared to 2011. This growth resulted from double-digit increases at Coca-Cola FEMSA and FEMSA Comercio.
Gross profit increased 14.8% compared to 4Q11, to Ps. 28.029 billion in 4Q12. Gross margin in 4Q12 increased 120 basis points compared to the same period in 2011 to 44.2% of total revenues, mainly driven by margin expansion at Coca-Cola FEMSA.
For the full year of 2012, gross profit increased 20.2% compared to 2011, to Ps. 101.300 billion. Gross margin increased 70 basis points compared to 2011 to 42.5% of total revenues, driven by margin expansion at Coca-Cola FEMSA and FEMSA Comercio.
Income from operations increased 24.9% as compared to 4Q11, to Ps. 9.735 billion in 4Q12. On an organic basis, income from operations increased 22.4% in 4Q12 compared to the same period in 2011. Consolidated operating margin increased 160 basis points compared to 4Q11, to 15.3% of total revenues, mainly driven by margin expansion at Coca-Cola FEMSA.
For the full year of 2012, income from operations increased 19.4% compared to 2011, to Ps. 29.227 billion. On an organic basis income from operations increased 14.8%. Our consolidated operating margin in 2012 increased 20 basis points compared to 2011 at 12.3% of total revenues.
Net consolidated income increased 67.9% compared to 4Q11 to Ps. 12.106 billion in 4Q12, mainly as a result of growth in FEMSA’s income from operations and by the net effect of non-recurring items, including the sale of Quimiproductos as communicated in 3Q12 as well as to an increase in FEMSA’s 20% participation in Heineken’s 4Q12 net income, driven by a non-cash exceptional gain related to the revaluation of certain equity
interests held by Heineken in Asia. The effective income tax rate was 29.2% in 4Q12 compared to 31.6% in 4Q11.
For the full year of 2012, net consolidated income increased 34.2% compared to 2011, to Ps. 28.051 billion, driven by the growth in income from operations as well as to an increase in FEMSA’s 20% participation in Heineken’s 4Q12 net income, driven by a non-cash exceptional gain as described above.
Net majority income for 4Q12 resulted in Ps. 2.70 per FEMSA Unit1. Net majority income per FEMSA ADS was US$ 2.08 for the quarter. For the full year of 2012, net majority income per FEMSA Unit1 was Ps. 5.79 (US$ 4.46 per ADS).
Capital expenditures amounted to Ps. 6.207 billion in 4Q12, reflecting incremental investments mainly at Coca-Cola FEMSA. For the full year of 2012, capital expenditures increased to Ps. 15.560 billion, reflecting incremental investments mainly at Coca-Cola FEMSA.
Our consolidated balance sheet as of December 31, 2012, recorded a cash balance of Ps. 38.116 billion (US$ 2.940 billion), an increase of Ps. 10.946 billion (US$ 844.4 million) compared to December 31, 2011.
Short-term debt was Ps. 8.702 billion (US$ 671.3 million), while long-term debt was Ps. 27.574 billion (US$ 2.127 billion). Our consolidated net cash balance was Ps. 1.840 billion (US$ 141.9 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 and available at www.coca-colafemsa.com.
Total revenues increased 15.6% compared to 4Q11, to Ps. 22.671 billion in 4Q12 mainly driven by the opening of 434 net new stores in the quarter, reaching 1,040 total net new store openings for the year. As of December 31, 2012, FEMSA Comercio had a total of 10,601 convenience stores, in line with the objective for 2012. Samestore sales increased an average of 7.5% for the quarter compared to 4Q11, reflecting a 4.8% increase in average customer ticket and a 2.5% increase in store traffic.
For the full year of 2012, total revenues increased 16.6% to Ps. 86.433 billion. FEMSA Comercio’s same-store sales increased an average of 7.7%, driven by a very balanced contribution of a 3.8% increase in store traffic and a 3.8% increase in average customer ticket.
Gross profit increased by 16.9% in 4Q12 compared to 4Q11, resulting in a 40 basis point gross margin expansion to 37.8% 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, including our achievement of certain sales objectives and the corresponding benefit accrued to us even though the impact
was higher in the first nine months of the year as we have been smoothing out the curve, (iii) a more efficient use of promotion-related marketing resources, and (iv) a better execution of segmented pricing strategies across markets. For the full year of 2012, gross margin expanded by 60 basis points to 35.0% of total revenues.
Income from operations increased 17.0% over 4Q11 to Ps. 2.406 billion in 4Q12. Operating expenses increased 16.9% to Ps. 6.174 billion, reflecting the growing number of stores as well as incremental expenses relating to, among other things, the continued strengthening of FEMSA Comercio’s organizational and IT structure, and the development of specialized distribution routes aimed at enabling our prepared food initiatives.
Operating margin expanded 10 basis points compared to 4Q11, to 10.6% of total revenues in 4Q12.
For the full year of 2012, income from operations increased 22.7% to Ps. 6.778 billion, resulting in an operating margin of 7.8%, which represents a 30 basis point expansion from the prior year.
- On November 9, 2012, FEMSA announced that its retail subsidiary, FEMSA Comercio, agreed to acquire a 75% stake in Farmacias YZA, a leading drugstore operator in Southeast Mexico, with the current shareholders staying as partners with the remaining 25%. Headquartered in Merida, Yucatan, Farmacias YZA currently operates 333 stores. FEMSA believes that it can contribute its significant expertise in the development of small-box retail formats to what is already a successful regional player in this industry. In turn, this transaction opens a new avenue for growth for FEMSA Comercio. The transaction is pending customary regulatory approvals and is expected to close in the first quarter of 2013.
CONFERENCE CALL INFORMATION:
Our Fourth Quarter and Full Year 2012 Conference Call will be held on: Thursday February 28, 2013, 12:00 PM
Eastern Time (11:00 AM Mexico City Time). To participate in the conference call, please dial: Domestic US:
(888) 523-1228; International: (719) 457-2661, Conference Id 7936534. 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 at
FEMSA is a leading company that participates in the beverage industry through Coca-Cola FEMSA, the largest bottler of Coca-Cola products in the world; in the retail industry through FEMSA Comercio, operating OXXO, the largest and fastest-growing chain of 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 Mexican Pesos as published by the Federal Reserve Bank of New York on December 31, 2012, which was 12.9635 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.
Five pages of tables and Coca-Cola FEMSA’s press release to follow.