FEMSA's 4Q Profit Soar - Analyst Blog

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Fomento Economico Mexicano S.A. 's ( FMX ) fourth-quarter 2011 net income from continuing operation surged 9.3% to MXN 7,111 million ($521.2 million) from MXN 6,503 million ($524.8 million) in the year-ago period. The improved results were primarily driven by an increase in comparable income from operation and inclusion of 20% economic interest in Heineken Group.

Total revenue grew 24.5% year over year to MXN 56,834 million ($4,165.9 million). The increase was mainly attributable to revenue growth at Coca-Cola FEMSA and FEMSA Comercio.

Total revenue at Coca-cola FEMSA grew 29.3% to MXN 36,187 ($2,625.5 million) million in the quarter, primarily driven by increased per unit average price and volume growth in Brazil, Mexico, Columbia and Argentina.

FEMSA Comercio registered a revenue growth of 1.6.9% to MXN 19,619 million ($1,438.1 million), mainly due to the opening of 413 net new stores in the quarter, reaching 1,135 net new stores in the year 2011 along with an increase of 8% in same-store sales.

FEMSA's gross profit recorded a growth of 25.8% year over year, and gross margin expanded 50 basis points (bps) to 43.1%. The increase was primarily due to raw-material cost pressures at Coca-Cola FEMSA, which was more than offset by the gross profit improvement at FEMSA Comercio.

Operating expenses as a percentage of total revenue increased 50 basis points year over year to 27.5% primarily due to higher expenses related to selling at Coca-Cola Femsa and FEMSA Comercio. However, FEMSA posted a 24.9% year-over-year growth in operating income to MXN 8,884 million ($651.2 million).

At the end of fiscal 2011, the company had cash and cash equivalents of MXN 27,658 million ($2,232.0 million) compared with MXN 27,163 million ($2,148.6 million) in the year-ago period. Long-term debt (including current maturities) at the end of the fiscal was MXN 28,129 million ($2,270.0 million), reflecting a capitalization ratio of 12.8%.

FEMSA currently retains a Zacks #4 Rank, which translates to a short-term 'Sell' rating. However, we maintain a long-term 'Neutral' recommendation on the stock.


 
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