Fomento Economico Mexicano, S.A.B. de C.V.
), also known as FEMSA, posted better-than-expected bottom-line
results for the first quarter of 2014. This world's largest
franchise bottler for
The Coca-Cola Company
) reported net majority income of 53 cents per share, which beat
the Zacks Consensus Estimate of 51 cents. However, on a
year-over-year basis, the company's net majority income fell
approximately 10.2% from the year-ago comparable quarter figure
of 59 cents per share.
Moreover, quarterly net consolidated income of the company
declined nearly 4.1% to Ps. 3,778 million (US$285.4 million) from
Ps. 3,939 million (US$311.2 million) in the year-ago quarter. The
decrease was primarily due to a fall in Heineken's first-quarter
2014 net income in which FEMSA has a 20% participation interest,
and increased financing expenses resulting from the recently
issued bonds by
Coca-Cola FEMSA S.A.B. de C.V.
) and FEMSA Comercio.
Quarter in Detail
Total revenue rose 14.3% year over year to Ps. 64,228 million
(US$4,852.7 million), mainly aided by improvement in revenues at
Coca-Cola FEMSA and FEMSA Comercio divisions. On an organic
basis, total revenue climbed 4.2% from the prior-year comparable
FEMSA's gross profit rose 14.0% year over year to Ps. 26,511
million (US$2,003.0 million). However, gross margin contracted 10
basis points (bps) to 41.3% primarily due to margin contraction
at the Coca-Cola FEMSA and FEMSA Comercio divisions.
FEMSA's operating income increased 16.2% to Ps. 5,946 million
(US$449.2 million) from Ps. 5,119 million (US$404.2 million) in
the year-ago period. Consolidated operating margin improved 20
bps to 9.3% on the back of margin expansion at Coca-Cola FEMSA.
On an organic basis, operating income grew 7.2% year over
Total revenue at
increased 15.3% year over year at Ps. 38,708 million (US$2,924.6
million). The year-over-year revenue growth at the segment was
primarily due to integration of Yoli in Mexico, along with
Fluminense and Spaipa in Brazil. However, on a currency neutral
basis and excluding the non-comparable effect of Yoli, Fluminense
and Spaipa, total revenue rose 20.2% due to increase in average
price per unit case at almost every region and volume growth in
Columbia, Brazil, Central America, Venezuela.
The segment's operating income for the quarter increased 18.0%
to Ps. 4,809 million (US$363.3 million) from the year-ago
quarter. Consequently, Coca-Cola FEMSA's operating margin
expanded 30 bps to 12.4% in the quarter. The year-over-year rise
in the segment's operating income and margin was primarily driven
by higher gross profit, which resulted from lower price paid for
PET and sweeteners in most of the company's operating
registered 12.3% year over year revenue growth to Ps. 24,371
million (US$1,841.3million). The rise was mainly attributable to
the opening of 135 net new stores in the quarter and a 0.4%
upside in same-store sales. The growth in same-store sales was
led by an increase of 0.4% in average customer traffic. The
company opened 1,120 net new stores in the last twelve months,
bringing the total store count to 11,856 as of Mar 31, 2014.
Operating income for the said quarter rose 6.6% year over year
to Ps. 1,035 million (US$78.2 million). However, the segment's
operating margin contracted 30 bps to 4.2% primarily due to
higher operating expenses resulting from new store openings and
increases in electricity outlay and expenses for new
FEMSA had cash balance of Ps. 32,994 million (US$2,527
million) as on Mar 31, 2014. Long and short-term debts were Ps.
74,027 million (US$5,670 million) and Ps. 2,310 million (US$176.9
million), respectively. Moreover, during the quarter, FEMSA
incurred capital expenditure of Ps. 3,050 million (US$233.1
Currently, FEMSA carries a Zacks Rank #3 (Hold). However, a
better-ranked stock worth a look in the beverages-brewers
Coca-Cola Enterprises Inc
), which has a Zacks Rank #2 (Buy).
COCA-COLA ENTRP (CCE): Free Stock Analysis
FOMENTO ECO-ADR (FMX): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
COCA-COLA FEMSA (KOF): Free Stock Analysis
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