Fomento Economico Mexicano S.A.
) second-quarter 2012 net income from continuing operation surged
28.8% to MXN 5,437 million ($425.2 million) from MXN 4,221 million
($330.1 million) in the year-ago period. The year-over-year
improvement was primarily driven by an increase in comparable
income from operation.
Total revenue grew 22.9% year over year to MXN 59,586 million
($4,659.6 million), mainly aided by revenue growth at Coca-Cola
FEMSA and FEMSA Comercio.
Total revenue at Coca-cola FEMSA grew 27.9% to MXN 36,295
million ($2,838.3 million) in the quarter, primarily driven by
double-digit growth across all divisions coupled with the benefits
from the acquisition ofGrupo Tampico, Grupo CIMSA and Grupo Fomento
Queretano in Mexico. Excluding these acquisitions, total revenue
FEMSA Comercio registered a revenue growth of 17.1% to MXN
22,209 million ($1,736.7 million), mainly due to the opening of 290
new stores in the quarter along with a 7.8% upside in same-store
sales. The company opened 1,026 new stores in the past twelve
FEMSA's gross profit improved 24.7% year over year, and gross
margin expanded 50 basis points (bps) to 41.9%. The increase was
primarily driven by gross profit improvement at FEMSA Comercio
coupled with the acquisition benefits in the Coca-Cola FEMSA
FEMSA posted a 13% year-over-year growth in operating income to
MXN 6,686 million ($522.8 million), whereas on an organic basis,
operating income rose 6.9%. However, operating income, as a
percentage of total revenue, decreased 100 basis points year over
year to 11.2%, primarily due to higher cost incurred at Coca-Cola
At the end of the second quarter of fiscal 2012, the company had
cash and cash equivalents of MXN 27,494 million ($2,050 million)
compared with MXN 31,176 million ($2,660 million) at the end of the
second-quarter 2011. Long-term debt at the end of the quarter was
MXN 25,574 million ($1,907 million), reflecting a capitalization
ratio of 12.3%.
FEMSA, which competes with
) retains a Zacks #3 Rank, which translates into a short-term Hold
rating for the next 1-3 months. Moreover, we maintain our long-term
'Neutral' recommendation on the stock.
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