SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF APRIL
2004
FOMENTO ECONOMICO MEXICANO, S.A. DE C.V.
(Exact name of Registrant as specified in its charter)
Mexican Economic Development, Inc.
(Translation of Registrant's name into English)
United Mexican States
(Jurisdiction of incorporation or organization)
General Anaya No. 601 Pte.
Colonia Bella Vista
Monterrey, NL 64410 Mexico
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F of Form 40-F.)
Form 20-F x Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes No x
--- ---
(If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82--.)
FEMSA Net Income up 95.9%, Reaching Ps. 1,346 Million
During First Quarter 2004
MONTERREY, Mexico--(BUSINESS WIRE)--April 26, 2004--Fomento Economico
Mexicano, S.A. de C.V. ("FEMSA") (NYSE: FMX; BMV: FEMSA UBD, FEMSA UB), the
Leader in Latin Beverages, today reported strong operational and financial
results for the first quarter of 2004.
Business Highlights - First Quarter 2004
-- FEMSA Consolidated Operating Income up 43.7% reaching Ps. 2.561
billion.
-- Carbonated soft-drinks comparable sales volume in Mexico increased
3.7%, mostly from Coca-Cola brand. Coca-Cola FEMSA's integration
process is moving forward. Operating income increased 51.4% to Ps.
1.573 billion.
-- FEMSA Cerveza's beer sales volume grew profitably: domestic up 5.8% to
5.122 million hectoliters and exports up 32.8% to 480 thousand
hectoliters, while operating income before management fee increased
24.5% reaching Ps. 675 million.
-- Oxxo continued its expansion and opened 99 net new stores during the
quarter, totaling 2,897 locations nationwide. Operating income
increased by 50.3% to Ps. 169 million.
Contacts:
Juan F. Fonseca
(52) 818-328-6245
juan.fonseca@femsa.com.mx
Alan Alanis
(52) 818-328-6211
alan.alanis@femsa.com.mx
Emily Klingbeil
(52) 818-328-6189
emily.klingbeil@femsa.com.mx
1
Jose Antonio Fernandez, Chairman and CEO of FEMSA, commented, "We started the
year 2004 on the right note. Our beer operations achieved significant volume
growth and improved margins as we intensified our effort to grow profitably
through focused market execution, efficient resource allocation, and better
tailoring of our offers to the consumer. In soft drinks, we continue integrating
our new territories into the FEMSA culture leveraging the best practices
developed over time by Coca-Cola FEMSA. Consequently, we are better prepared to
face the challenging competitive landscape of our soft-drink territories,
particularly in Mexico. Our retail chain, Oxxo, continues its expansion,
increasing its relevance for FEMSA as a valuable strategic vehicle for
distributing our beverages."
Mr. Fernandez continued, "This quarter was a step in the right direction but we
must keep working: I know we have the best team and have developed the right
tools to continue consolidating our position as the leading beverage company in
Latin America."
Notice
Upon the completion of our acquisition of Panamerican Beverages, Inc.
("Panamco"), we began consolidating its operating results as of May 2003.
Therefore, operating results for Coca-Cola FEMSA and for FEMSA consolidated will
not be fully comparable with previous quarters until the third quarter of 2004,
and on a annual basis, they will not be fully comparable until we report our
2005 results.
DISCUSSION OF UNAUDITED FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31,
2004 COMPARED TO THE FIRST QUARTER ENDED MARCH 31, 2003.
FEMSA
----------------------------------------------------------------------------------------------------------------------
FEMSA and Subsidiaries
(Millions of Pesos and % change vs. IQ03)
----------------------------------------------------------------------------------------------------------------------
Total Revenues Income from Operations(1) Operating Margin
IQ 04 Chg IQ 04 Chg IQ 04 Chg
---------------------- -------------------------- -----------------------
FEMSA 20,347 55.4% 2,561 43.7% 12.6% (1.0%)
Coca-Cola FEMSA 10,439 139.6% 1,573 51.4% 15.1% (8.7%)
FEMSA Cerveza 4,842 6.3% 675 24.5% 13.9% 2.0%
FEMSA Comercio 4,660 24.9% 169 50.3% 3.6% 0.6%
FEMSA Empaques 1,768 10.0% 236 8.2% 13.4% (0.2%)
---------------------------------------
(1) Before Deduction of Management Fees for FEMSA Cerveza, FEMSA Comercio, and
FEMSA Empaques.
2
FEMSA total revenues increased by 55.4% to Ps. 20.347 billion during 1Q04 from
Ps. 13.091 billion during 1Q03. The increase in total revenues was driven by
growth in every one of our main operating companies. In-line with 4Q03, most of
the incremental revenue relates to Coca-Cola FEMSA and its new revenue sources.
Other reasons for the growth in total revenues during the first quarter include:
(i) strong revenue growth of 24.9% at FEMSA Comercio due to the opening of 620
stores year over year, 99 of which were opened during the first quarter of 2004,
and (ii) the 5.8% increase in FEMSA Cerveza's domestic sales volume combined
with an average domestic price increase of 5.0% in nominal terms implemented
during the month of February.
Gross margin decreased 90 basis points to 46.4% of total revenues during 1Q04
compared to 47.3% during 1Q03. This was primarily due to the integration of the
new Coca-Cola FEMSA operations and, to a lesser extent, a slight contraction in
the gross margin of FEMSA Empaques and a higher relevance of FEMSA Comercio as a
part of our consolidated results.
Income from operations (including results of affiliated companies) increased by
43.7% to Ps. 2.561 billion during 1Q04, resulting in an operating margin of
12.6%. The observed operating margin contraction of 100 basis points from 1Q03
primarily resulted from the integration of the acquired Panamco soft-drink
territories that have a lower level of profitability than Coca-Cola FEMSA's
original territories. The decrease in operating margin during 1Q04 was also
attributable to the increased contribution of the Oxxo retail chain in our
consolidated financial results. The consolidated margin contraction was
partially offset by 200 basis points of operating margin expansion at FEMSA
Cerveza.
Net interest expense amounted to Ps. 704 million during 1Q04 compared to Ps. 150
million during the same quarter of 2003. This year over year increase is
primarily due to the increased interest expense related to new debt issued by
Coca-Cola FEMSA in order to finance the acquisition of Panamco.
Foreign exchange gain (loss) amounted to a gain of Ps. 150 million during 1Q04
compared to a loss of Ps. 163 million during 1Q03. This gain is primarily due to
the 0.54% appreciation of the peso against the dollar on our net dollar
liabilities.
Monetary position gain (loss) amounted to a gain of Ps. 499 million during 1Q04,
compared to a loss of Ps. 13 million during 1Q04. The gain reflects an
inflationary impact over the higher net liabilities recorded year over year.
Tax recognized during 1Q04 amounted to Ps. 1.020 billion, which includes income
tax, tax on assets, and employee profit sharing ("taxes") compared to Ps. 652
million during 1Q03. This effective tax rate for the quarter was 43.1%.
Net income amounted to Ps. 1.346 billion during 1Q04, up 95.9% with respect to
1Q03.
3
Net majority income amounted to Ps. 814 million during 1Q04 compared with Ps.
419 million during 1Q03. Net majority income per FEMSA Unit(2) was Ps. 0.768 in
1Q04. Net majority income per FEMSA ADR, considering an exchange rate of Ps.
11.174 per dollar, was 0.688 dollars during 1Q04.
Capital expenditures amounted to Ps. 1.233 billion for 1Q04 compared to Ps.
1.648 billion in 1Q03. Approximately a third of this difference is explained by
the investments we did last year at FEMSA Empaques for refurbishment of one of
our glass bottle furnaces and the remaining amount is due to the timing of our
capital investments at FEMSA Cerveza.
Consolidated net debt. As of March 31, 2004, FEMSA recorded a cash balance of
Ps. 6.600 billion ($591 million) and a net debt balance of Ps. 30.408 billion
($2,721 million). Our consolidated net debt continued to decline in 1Q04, as
Coca-Cola FEMSA reduced its debt while FEMSA Cerveza and Comercio increased
their leverage in the ordinary course of their operations.
Recent Developments: "Six" stores transferred from FEMSA Cerveza to FEMSA
Comercio. During the month of December 2003, all of the "Six" stores that were
considered suitable to be converted into the Oxxo format were sold to FEMSA
Comercio. This amounted to 319 "Six" stores. The transfer will increase FEMSA
Cerveza's ability to focus on its core operations, while providing FEMSA
Comercio with a number of proven locations. Approximately two-thirds of the
transferred "Six" stores will be converted into Oxxos within the next 12 months,
while the remaining stores will be converted over the medium-term.
In order to assure comparability, and in accordance with accounting rules, for
1Q03, we have taken the financial results of these "Six" stores from FEMSA
Cerveza and incorporated them into FEMSA Comercio. The analysis presented
herein, is based on these reclassified figures for the first quarter 2003. It is
worth mentioning that this change has no impact on FEMSA Consolidated figures.
For further details, please see the attached financial statements.
Coca-Cola FEMSA
Coca-Cola FEMSA's financial results and discussion are incorporated by reference
to Coca-Cola FEMSA's press release, which is attached to this press release.
---------------------------------------
(2) FEMSA Units consists of FEMSA UBD units and FEMSA UB units. Each FEMSA UBD
unit is comprised of one Series B share, two Series D-B shares and two
Series D-L shares. Each FEMSA UB unit is comprised of five series B shares.
The number of FEMSA Units outstanding as of March 31, 2004 was
1,059,462,090, equivalent to the total number of shares of the Company
outstanding as of March 31, 2004 divided by 5.
4
FEMSA Cerveza
Domestic sales volume grew by 5.8% to 5.122 million hectoliters during 1Q04,
reflecting favorable demand growth across all territories. We attribute this
increase to (i) strong demand during the month of January in anticipation of a
5.0% nominal average domestic price increase which was implemented throughout
the month of February, (ii) continued positive sales volume growth after we
finished implementing the price increase, (iii) successful promotions of Sol,
Tecate Light, and Indio brands, and (iv) continued modest recovery of the
Mexican economy during the first quarter.
Export sales volume grew by 32.8% to 480 thousand hectoliters during 1Q04. Most
of this increase came from sales to the United States, where we estimate that
the increase of sales from the distributors to the retailers was approximately
15.0%, while the remaining growth came from inventory build-up at the
distributors. This 15.0% increase in depletions was primarily due to (i)
successful market strategies particularly for our Tecate and Dos Equis brands in
the U.S., and (ii) a recovery in the U.S. economy during the first quarter. The
export revenue per hectoliter increased 1.9% in peso terms, mainly as a result
of a better average price.
Total revenues increased by 6.3% to Ps. 4.842 billion during 1Q04 from Ps. 4.555
billion in 1Q03. This positive growth is a result of a 7.7% increase in total
sales volume as well as a 1.9% increase in export revenue per hectoliter,
partially offset by a decrease of 1.1% in domestic revenue per hectoliter. The
5.0% average price increase in nominal terms is reflected only partially in the
1Q04 sales figures, given that it was implemented gradually throughout February.
Cost of sales increased 5.5%, which is still below total volume growth thanks to
efficiencies, better purchasing terms for raw materials, headcount reductions,
and lower transportation costs from our breweries to the warehouses. Gross
profit reached Ps. 2.745 billion, a 6.9% increase compared to the first quarter
of 2003. This favorable impact was due to the aforementioned improvements on
volume, price and costs.
Administrative expenses increased 6.4% to Ps. 625 million during 1Q04 compared
to Ps. 587 million in 1Q03. This increase was primarily due to the amortization
of the commercial module of our Enterprise Resource Planning System ("ERP"),
which began in 3Q03.
Selling expenses increased 1.2% to Ps. 1.433 billion during 1Q04 compared to Ps.
1.416 billion in 1Q03. This slight increase lagged comparable revenue growth due
to various cost containment initiatives throughout the organization. As a
percentage of sales, selling expenses decreased 150 basis points.
Participation in Affiliated Companies resulted in a loss of Ps. 12.9 million
during the quarter compared to a loss of Ps. 22.6 million during 1Q03. This was
due to efficiencies at Labatt USA.
5
Operating income (before deduction of management fees) increased 24.5% to Ps.
675 million during 1Q04 compared to Ps. 542 million during 1Q03. This increase
reflects higher volumes in addition to improvements at the gross margin and
operating expenses level. Operating margin (before deduction of management fees)
increased 200 basis points to 13.9% of total revenues compared to 11.9% of total
revenues during 1Q03. The margin expansion is attributable to higher sales
volume over stable fixed costs, production efficiencies, better purchasing
terms, and the effective implementation of expense containment initiatives
FEMSA Comercio
Total revenues increased by 24.9% to Ps. 4.660 billion during 1Q04 from Ps.
3.731 billion during 1Q03. This increase was in-line with the growth in new Oxxo
stores, which increased by 620 net stores or 27.2% from 1Q03. During the first
quarter of 2004, FEMSA Comercio continued its sustained growth performance
adding 99 net new Oxxo stores. As of March 31, 2004, we had 2,897 Oxxos
nationwide.
Oxxo same store sales increased an average of 10.0% during 1Q04 reflecting an
increase in the average ticket of 4.1% and an increase in store traffic of 5.6%.
This increase reflects the rapid pace of expansion as well as stronger category
management practices that enabled Oxxo to improve the mix of products within the
store. This positive trend in same store sales growth can be seen across the
nation.
Cost of sales increased in-line with sales growth reaching Ps. 3.455 billion
during 1Q04. Gross profit reached Ps. 1.205 billion during 1Q04, achieving a
gross margin of 25.9% of total revenues. This figure increased 10 basis points
from first quarter 2003 levels.
Administrative expenses increased 47.4% to Ps. 96 million during 1Q04 as a
result of (i) new amortizations of ERP, (ii) expenses related to the ERP that
can no longer be capitalized, and (iii) the opening of two new regional offices.
Selling expenses increased 20.0% to Ps. 941 million during 1Q04, declining to
20.2% of total revenues from 21.0% during the same period of 2003. With our
increasing scale of operations, we are better able to leverage our investments
in technology, systems, distribution, and personnel to further strengthen the
development of Oxxo's business model.
Operating income increased 50.3% to Ps. 169 million during 1Q04 compared to Ps.
112 million in 1Q03. The increase in operating income was due to increased
revenues from expanded operations and reductions in selling expenses as a
percentage of total revenues. Operating margin expanded 60 basis points over the
period to 3.6% of total sales for 1Q04. The improvements in selling expenses
more than offset the additional administrative expenses, therefore allowing for
an increase in the operating margin.
6
FEMSA Empaques
Total revenues increased by 10.0% to Ps. 1.768 billion during 1Q04. This
increase was attributed to the following: (i) a surge in the sales volume of
refrigerators shipped to the new Coca-Cola FEMSA territories, and (ii) a 11.5%
sales volume increase in bottles, mainly to Coca-Cola FEMSA and FEMSA Cerveza.
Cost of sales increased 12.1% reaching Ps. 1.387 billion during 1Q04 compared to
Ps. 1.237 billion during 1Q03. This increase is primarily due to the year over
year increase in the sales volume of its principal products. Gross Profit
increased by 3.2% to Ps. 381 million pesos in 1Q04 compared to Ps. 369 million
in 1Q03. As a percentage of total revenues the gross profit margin declined 140
basis points in 1Q04, primarily reflecting a slight price decrease in real terms
for its principal products. The real price decrease was due to (i) competitive
market conditions, and (ii) a lower rate of peso devaluation against our dollar
denominated revenues.
Operating Expenses decreased 4.0% to Ps. 145 million during 1Q04 compared to Ps.
151 million in 1Q03. This was due to a reduction in administrative expenses of
0.7% and a reduction in selling expenses of 5.5% from reduced shipping expenses
related to the can export business and better efficiencies in the distribution
of our products in Mexico.
Operating income increased by 8.2% to Ps. 236 million during 1Q04 resulting in
an operating margin before management fees of 13.4% of total revenues, in line
with 1Q03.
7
--------------------------------------------------------------------------------
CONFERENCE CALL INFORMATION:
Our First Quarter 2004 Conference Call will be held on: Monday April 26, 2004,
4:00 P.M. Eastern Time (3:00 P.M. Mexico City Time). To participate in the
conference call, please dial: Domestic U.S.: 1-800-915-4836, International:
973-317-5319. This Conference Call will also be transmitted through live webcast
at http:ir.femsa.com
If you are unable to participate live, an instant replay of the conference call
will be available through May 3, 2004. To listen to the replay please dial:
Domestic U.S.: 1-800-428-6051; International: 973-709-2089, Passcode: 351720.
--------------------------------------------------------------------------------
Set forth in this press release is certain unaudited financial information for
FEMSA for the first quarter ended March 31, 2004, compared to the first quarter
ended March 31, 2003. We are a holding company whose principal activities are
grouped under the following sub-holding companies and carried out by their
respective operating subsidiaries: Coca-Cola FEMSA, S.A. de C.V., which engages
in the production, distribution and marketing of non-alcoholic beverages; FEMSA
Cerveza, S.A. de C.V., which engages in the production, distribution and
marketing of beer; FEMSA Comercio, S.A. de C.V., which engages in the operation
of convenience stores; and FEMSA Empaques, S.A. de C.V., which engages in the
production and distribution of packaging materials.
All of the figures in this report have been restated in constant Mexican pesos
("Pesos" or "Ps.") with purchasing power as of March 31, 2004 and were prepared
in accordance with Mexican Generally Accepted Accounting Principles ("Mexican
GAAP"). As a result, all percentage changes are expressed in real terms.
FORWARD LOOKING STATEMENTS
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 expectations and are based upon
currently available data. Actual results are subject to future events and
uncertainties, which could materially impact our actual performance.
--------------------------------------------------------------------------------
NOTES:
We invite you to register in our Investor Relations Site located at
http://ir.femsa.com to receive notification of all of our press releases,
earnings releases and IR Events automatically through our e-mail alert service.
Please contact FEMSA's Investor Relations officers if you wish to have your name
added or removed from this distribution list or to receive this press release
through a specific medium only.
--------------------------------------------------------------------------------
Seven pages of tables and Coca-Cola FEMSA's press release to follow
8
FEMSA
Consolidated Income Statement
For the three months ended on March 31 of:
(Expressed in Millions of Pesos as of
March 31, 2004)
------------------------------------------------------------------
% % %
2004 Integ. 2003 Integ. Incr.
------------------------------------------------------------------
Net sales 20,270 99.6 13,024 99.5 55.6
Other operating revenues 77 0.4 67 0.5 14.9
------------------------------------------------------------------
Total revenues 20,347 100.0 13,091 100.0 55.4
Cost of sales 10,913 53.6 6,899 52.7 58.2
------------------------------------------------------------------
Gross profit 9,434 46.4 6,192 47.3 52.4
------------------------------------------------------------------
Administrative expenses 1,513 7.4 1,193 9.1 26.8
Selling expenses 5,347 26.3 3,194 24.4 67.4
------------------------------------------------------------------
Operating expenses 6,860 33.7 4,387 33.5 56.4
Participation in affiliated
companies (13) (0.1) (23) (0.2) (43.5)
------------------------------------------------------------------
Income from operations 2,561 12.6 1,782 13.6 43.7
------------------------------------------------------------------
Interest expense (792) (344) 130.2
Interest income 88 194 (54.6)
------------------------------------------------------------------
Interest expense, net (704) (150) N.S.
Foreign exchange (loss) gain 150 (163) N.S.
Gain (loss) on monetary N.S.
position 499 (13)
------------------------------------------------------------------
Integral result of financing (55) (326) 83.1
Other (expenses) income (140) (117) 19.7
------------------------------------------------------------------
Income before taxes 2,366 1,339 76.7
Taxes (1,020) (652) 56.4
------------------------------------------------------------------
Net Income 1,346 687 95.9
------------------------------------------------------------------
Net majority income 814 419 94.3
Net minority income 532 268 98.5
------------------------------------------------------------------
EBITDA & CAPEX
------------------------------------------------------------------
Operating Income 2,561 12.6 1,782 13.6 43.7
Depreciation 716 3.5 578 4.4 23.7
Amortization & other 754 3.7 490 3.7 53.8
------------------------------------------------------------------
EBITDA 4,030 19.8 2,851 21.8 41.4
CAPEX 1,233 1,648 (25.2)
------------------------------------------------------------------
-----------------------------------
FINANCIAL RATIOS (Times) 2004 2003 Var. p.p.
------------------------------------------------------------------
Liquidity 1.15 1.90 (0.75)
Interest coverage(1) 5.73 19.00 (13.28)
Leverage 1.22 0.85 0.37
Capitalization 45.16% 32.69% 12.47
------------------------------------------------------------------
(1) Income from operations + depreciation + other non-cash charges
/ interest expense, net.
9
FEMSA
Consolidated Balance Sheet
As of March 31,:
(Expressed in Millions of
Pesos as of March 31, 2004)
------------------------------
ASSETS 2004 2003 % Incr.
---------------------------------------------------------------------
Cash and cash equivalents 6,600 14,536 (54.6)
Accounts receivable 4,302 3,078 39.8
Inventories 6,816 5,453 25.0
Prepaid expenses 1,836 1,341 36.9
---------------------------------------------------------------------
Total Current Assets 19,554 24,408 (19.9)
Property, plant and equipment, net 42,524 31,796 33.7
Goodwill(1) 34,778 762 N.S.
Deferred assets 6,179 5,309 16.4
Other assets 1,872 1,380 35.7
---------------------------------------------------------------------
TOTAL ASSETS 104,907 63,655 64.8
---------------------------------------------------------------------
LIABILITIES & STOCKHOLDERS' EQUITY
---------------------------------------------------------------------
Bank loans 2,269 3,859 (41.2)
Current maturities long term debt 2,461 539 356.6
Interest payable 403 210 91.9
Dividends payable 908 1,087 (16.5)
Operating liabilities 10,906 7,120 53.2
---------------------------------------------------------------------
Total Current Liabilities 16,947 12,815 32.2
Bank loans 32,278 10,453 208.8
Deferred income taxes 3,761 4,210 (10.7)
Other liabilities 4,716 1,743 170.6
---------------------------------------------------------------------
Total Liabilities 57,702 29,221 97.5
Total Stockholders' equity 47,205 34,434 37.1
---------------------------------------------------------------------
LIAB. & STOCKHOLDERS' EQUITY 104,907 63,655 64.8
---------------------------------------------------------------------
---------------------
March December
NET DEBT 2004 2003
-------------------------------------------------------------
FEMSA Holding (741) (492)
Coca-Cola FEMSA 25,032 26,561
FEMSA Cerveza 3,022 2,280
FEMSA Comercio 1,343 1,041
FEMSA Empaques 1,752 1,737
-------------------------------------------------------------
Total Consolidated 30,408 31,126
-------------------------------------------------------------
Short-Term 2,269 2,465
Long-Term 34,739 36,524
-------------------------------------------------------------
Total Debt 37,008 38,989
Cash & Cash Equivalents 6,600 7,863
-------------------------------------------------------------
Net Debt 30,408 31,126
-------------------------------------------------------------
(1) Consist mainly in the intangible assets generated by
Panamco acquisition.
10
Coca-Cola FEMSA
Results from operations
For the three months ended March 31 of:
Expressed in Millions of --------------------------------------
Pesos as of March 31, 2004 % % %
2004 Integ. 2003 Integ. Incr.
------------------------------- --------------------------------------
Net sales 10,367.4 99.3 4,303.5 98.8 140.9
Other revenues 71.7 0.7 53.1 1.2 35.0
------------------------------- --------------------------------------
Total revenues 10,439.1 100.0 4,356.6 100.0 139.6
Cost of good sold 5,388.6 51.6 2,100.6 48.2 156.5
------------------------------- --------------------------------------
Gross margin 5,050.5 48.4 2,256.0 51.8 123.9
------------------------------- --------------------------------------
Administrative expenses 601.7 5.8 343.8 7.9 75.0
Sales expenses 2,876.1 27.6 873.4 20.0 229.3
------------------------------- --------------------------------------
Operating expenses 3,477.8 33.3 1,217.2 27.9 185.7
------------------------------- --------------------------------------
Income from operations 1,572.7 15.1 1,038.8 23.8 51.4
Depreciation 307.4 2.9 125.6 2.9 144.7
Other non-cash charges 262.2 2.5 96.8 2.2 170.9
------------------------------- --------------------------------------
EBITDA 2,142.3 20.5 1,261.2 28.9 69.9
Capital Expenditures 409.0 364.1 12.3
------------------------------- --------------------------------------
Sales Volumes (1)
(Millions of Unit Cases)
------------------------------- --------------------------------------
Mexico 228.3 51.8 228.1 53.3 0.1
Central America 26.5 6.0 24.6 5.8 7.5
Colombia 41.6 9.4 44.2 10.3 (5.9)
Venezuela 40.9 9.3 28.3 6.6 44.5
Brazil 66.4 15.1 70.9 16.6 (6.3)
Argentina 37.1 8.4 31.6 7.4 17.5
------------------------------- --------------------------------------
Total KOF 440.8 100.0 427.7 100.0 3.0
------------------------------- --------------------------------------
(1) For comparison purposes the 2003 sales volumes of the acquired
Panamco territories, were included.
11
FEMSA Cerveza
Results from operations
For the three months ended on March 31 of:
---------------------------------------------------------------------
Expressed in Millions of 2003 "SIX" 2003
Pesos as of March 31, 2004 2004 % Integ. Reported Stores Comparable % Integ.% Incr.
-------------------------------------------------- ---------------------------------------------------------------------
Net sales 4,809.9 99.3 4,697.9 179.3 4,518.6 99.2 6.4
Other revenues 31.7 0.7 36.3 36.3 0.8 (12.7)
-------------------------------------------------- ---------------------------------------------------------------------
Total revenues 4,841.6 100.0 4,734.2 179.3 4,554.9 100.0 6.3
Cost of good sold 2,096.2 43.3 2,129.3 141.6 1,987.7 43.6 5.5
-------------------------------------------------- ---------------------------------------------------------------------
Gross margin 2,745.4 56.7 2,604.9 37.7 2,567.2 56.4 6.9
-------------------------------------------------- ---------------------------------------------------------------------
Administrative expenses 624.6 12.9 589.4 2.3 587.1 12.9 6.4
Sales expenses 1,433.2 29.6 1,450.7 35.1 1,415.6 31.1 1.2
-------------------------------------------------- ---------------------------------------------------------------------
Operating expenses 2,057.8 42.5 2,040.1 37.4 2,002.7 44.0 2.8
Participation in affiliated companies (12.9) (22.6) (22.6) (42.9)
------------------------------------------------------------------------------------------------------------------------
Income from operations before
management fee 674.7 13.9 542.2 0.3 541.9 11.9 24.5
Management fee 103.9 2.1 107.5 107.5 2.4 (3.3)
Income from operations 570.8 11.8 434.7 0.3 434.4 9.5 31.4
-------------------------------------------------- ---------------------------------------------------------------------
Depreciation 282.6 5.8 299.6 299.6 6.6 (5.7)
Other non-cash charges 429.8 8.9 387.7 387.7 8.5 10.9
-------------------------------------------------- ---------------------------------------------------------------------
EBITDA 1,283.2 26.5 1,122.0 0.3 1,121.7 24.6 14.4
Capital Expenditures 573.2 871.2 871.2 (34.2)
-------------------------------------------------- ---------------------------------------------------------------------
Sales integration
-------------------------------------------------- ---------------------------------------------------------------------
Domestic revenues Millions of Ps. 4,443.5 92.4 4,427.1 4,247.8 94.0 4.6
Exports revenues: Millions of Ps. 366.4 7.6 270.8 270.8 6.0 35.3
US Millions 32.8 23.7 23.7 38.4
------------------------------------------------------------------------------------------------------------------------
Sales volumes
(Thousand hectoliters)
-------------------------------------------------- ---------------------------------------------------------------------
Domestic 5,122.0 91.4 4,840.6 4,840.6 93.1 5.8
Exports 480.2 8.6 361.5 361.5 6.9 32.8
-------------------------------------------------- ---------------------------------------------------------------------
Total 5,602.2 100.0 5,202.1 5,202.1 100.0 7.7
-------------------------------------------------- ---------------------------------------------------------------------
-------------------------------------------------- ---------------------------------------------------------------------
Revenue per hectoliter
-------------------------------------------------- ---------------------------------------------------------------------
Domestic 867.5 914.6 877.5 (1.1)
Exports 763.0 749.1 749.1 1.9
-------------------------------------------------- ---------------------------------------------------------------------
Total 858.6 903.1 868.6 (1.2)
-------------------------------------------------- ---------------------------------------------------------------------
Total presentation mix
(%)
-------------------------------------------------- ---------------------------------------------------------------------
Returnable 67.3 69.5
Non Returnable 9.1 8.0
Cans 23.6 22.5
-------------------------------------------------- ---------------------------------------------------------------------
Total 100.0 100.0
-------------------------------------------------- ---------------------------------------------------------------------
12
FEMSA Comercio
Results from operations
For the three months ended on March 31 of:
---------------------------------------------------------------------
Expressed in Millions of 2003 "SIX" 2003
Pesos as of March 31, 2004 2004 % Integ. Reported Stores Comparable % Integ. % Incr.
--------------------------------------------- ---------------------------------------------------------------------
Net sales 4,660.3 100.0 3,551.2 179.3 3,730.5 100.0 24.9
Other revenues
--------------------------------------------- ---------------------------------------------------------------------
Total revenues 4,660.3 100.0 3,551.2 179.3 3,730.5 100.0 24.9
Cost of good sold 3,455.2 74.1 2,627.9 141.6 2,769.5 74.2 24.8
--------------------------------------------- ---------------------------------------------------------------------
Gross margin 1,205.1 25.9 923.3 37.7 961.0 25.8 25.4
--------------------------------------------- ---------------------------------------------------------------------
Administrative expenses 95.7 2.1 62.6 2.3 64.9 1.7 47.4
Sales expenses 940.5 20.2 748.6 35.1 783.7 21.0 20.0
--------------------------------------------- ---------------------------------------------------------------------
Operating expenses 1,036.2 22.2 811.2 37.4 848.6 22.7 22.1
--------------------------------------------- ---------------------------------------------------------------------
Income from operations before
management fee 168.9 3.6 112.1 0.3 112.4 3.0 50.3
Management fee 28.1 0.6 16.3 16.3 0.4 71.9
Income from operations 140.8 3.0 95.8 0.3 96.1 2.6 46.6
--------------------------------------------- ---------------------------------------------------------------------
Depreciation 41.6 0.9 30.8 30.8 0.8 35.0
Other non-cash charges 39.8 0.9 33.1 33.1 0.9 20.2
--------------------------------------------- ---------------------------------------------------------------------
EBITDA 222.2 4.8 159.7 0.3 160.0 4.3 38.9
Capital Expenditures 231.7 210.3 210.3 10.2
--------------------------------------------- ---------------------------------------------------------------------
-------------------------------
Information of Oxxo Stores 2004 2003 % Incr.
--------------------------------------------- -------------------------------
Total stores 2,897 2,277 27.2
New oxxo stores 99 61 62.3
Same stores data: (1)
Sales (Thousands Pesos) 529.9 481.7 10.0
Traffic 21.0 19.9 5.6
Ticket 25.2 24.2 4.1
--------------------------------------------- -------------------------------
(1) Monthly average information per store, considering same stores with 13
months of operations.
13
FEMSA Empaques
Results from operations
For the three months ended on March 31 of:
Expressed in Millions of -------------------------------------
Pesos as of March 31, 2004 % % %
2004 Integ. 2003 Integ. Incr.
------------------------------------------ -------------------------------------
Net sales 1,761.0 99.6 1,600.6 99.6 10.0
Other revenues 6.7 0.4 6.0 0.4 12.9
------------------------------------------ -------------------------------------
Total revenues 1,767.7 100.0 1,606.6 100.0 10.0
Cost of good sold 1,386.5 78.4 1,237.3 77.0 12.1
------------------------------------------ -------------------------------------
Gross margin 381.2 21.6 369.3 23.0 3.2
------------------------------------------ -------------------------------------
Administrative expenses 45.6 2.6 45.9 2.9 (0.7)
Sales expenses 99.2 5.6 105.0 6.5 (5.5)
------------------------------------------ -------------------------------------
Operating expenses 144.9 8.2 150.9 9.4 (4.0)
------------------------------------------ -------------------------------------
Income from operations before
management fee 236.4 13.4 218.4 13.6 8.2
Management fee 27.0 1.5 26.2 1.6 3.1
Income from operations 209.4 11.8 192.3 12.0 8.9
------------------------------------------ -------------------------------------
Depreciation 74.4 4.2 63.5 4.0 17.2
Other non-cash charges 18.4 1.0 17.6 1.1 4.6
------------------------------------------ -------------------------------------
EBITDA 302.2 17.1 273.4 17.0 10.6
Capital Expenditures 26.6 208.1 (87.2)
------------------------------------------ -------------------------------------
Total sales volume ------------------------
(Millions of pieces) 2004 2003 % Incr.
------------------------------------------ ------------------------
Cans 742.3 737.3 0.7
Crown Caps 3,576.4 3,115.5 14.8
Glass Bottles 233.9 209.8 11.5
------------------------------------------ ------------------------
Export volumes: Cans 86.8 148.9 (41.7)
Crown Caps 2,394.1 1,727.5 38.6
------------------------------------------ ------------------------
Exports revenues: Millions of Ps. 190.6 210.8 (9.6)
US Millions 17.1 18.4 (7.1)
------------------------------------------ ------------------------
------------------------
% of sales revenue by client category: Var.
2004 2003 p.p.
-------------------------------------------------------------------
Intercompany sales 52.7 57.8 (5.1)
------------------------------------------ ------------------------
FEMSA Cerveza 38.6 37.6 1.0
Coca-Cola FEMSA 14.1 20.2 (6.1)
------------------------------------------ ------------------------
Third-party sales 47.3 42.2 5.1
------------------------------------------ ------------------------
Domestic 36.4 29.7 6.7
Export 10.9 12.5 (1.6)
------------------------------------------ ------------------------
Total 100.0 100.0 -
------------------------------------------ ------------------------
14
FEMSA
Other Financial Information
For the three months ended on March 31, 2004:
MACROECONOMIC INFORMATION
Inflation 2004 Exchange Rate
-------------------------------------
LTM I trim. Per USD Per Peso
----------------------------------------------------------------------
Mexico 4.23% 1.570% 11.1740 1.0000
Colombia 5.98% 2.870% 2,678.1600 0.0042
Venezuela 23.56% 6.350% 1,920.0000 0.0058
Brazil 6.50% 1.720% 2.9090 3.8412
Argentina 2.72% 0.800% 2.8600 3.9070
----------------------------------------------------------------------
15
PRESS RELEASE
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION:
Alfredo Fernandez / Julieta Naranjo
Investor Relations Department
Coca-Cola FEMSA, S.A. de C.V.
(52-55) 5081-5120 / 5121 / 5148
afernandeze@kof.com.mx / jnaranjo@kof.com.mx
WEBSITE: www.cocacola-femsa.com.mx
COCA-COLA FEMSA announces first quarter 2004 results
FIRST QUARTER 2004
-- Consolidated revenues reached Ps.10,439.0 million and consolidated
operating income totaled Ps.1,572.7 million during the first quarter
of 2004, reaching a consolidated operating margin of 15.1%.
Mexico City (April 26, 2004) - Coca-Cola FEMSA, S.A. de C.V. (BMV: KOFL; NYSE:
KOF) ("Coca-Cola FEMSA" or the "Company"), the largest Coca-Cola bottler in
Latin America and second largest Coca-Cola bottler in the world, announced today
its consolidated results for the first quarter of 2004.
"The implementation of our values and our organizational culture throughout our
new territories is helping us to face a new competitive dynamics in our
different markets. We expect to achieve better results as we implement
initiatives that include: aligning our operating practices, developing new
packaging and product alternatives for the consumer along with market
segmentation initiatives " stated Carlos Salazar, Chief Executive Officer of the
Company.
CONSOLIDATED RESULTS
During the first quarter of 2004, our consolidated revenues reached Ps.10,439.0
million. Average price per unit case was Ps.23.52 (U.S.$2.10). Consolidated
operating income reached Ps.1,572.7 million during the first quarter of 2004,
resulting in a 15.1% operating margin.
The integral cost of financing totaled Ps.26.9 million during the first quarter
of 2004, reflecting the greater accrued interest expenses related to the
additional indebtedness incurred and assumed in connection with the Panamco
acquisition, which were partially offset by the consolidated monetary position
gain, resulting from inflation adjustments applied to the consolidated net
monetary position.
16
The income tax, tax on assets and employee profit sharing as a percentage of
income before taxes, was 41.3% during the first quarter of 2004, reflecting the
Mexican effective tax rate of 43.0% including the employee profit sharing rate
of 10% that applied to our Mexican income before taxes, which comprised the
majority of the taxable income during the quarter.
Consolidated majority net income was Ps.868.4 million in the first quarter of
2004, resulting in earnings per share ("EPS") of Ps.0.470 (U.S.$0.421 per ADS)
computed on the basis of 1,846 million shares outstanding (each ADS represents
ten local shares).
BALANCE SHEET
As of March 31, 2004, Coca-Cola FEMSA had a cash balance of Ps.2,533 million
(U.S.$226.8 million), total short-term debt of Ps.2,007 million (U.S.$179.7
million) and long-term debt of Ps.25,588 million (U.S.$2,290.8 million).
During the first quarter of 2004, the Company prepaid U.S.$235 million of debt
maturing 2006 and Ps.905 million (equivalent to approximately U.S.$81.0 million)
of debt maturing in 2004. This was achieved by taking a new U.S.$50 million six
year bullet bank loan and a Ps.1,650 million seven year bullet bank loan
(equivalent to approximately U.S.148 million) and the remaining with cash on
hand. This refinancing improved our maturity profile and currency exposure.
The following charts set forth the debt profile of the Company by currency and
interest rate type, and the debt amortization schedule as of March 31, 2004:
--------------------------------------------------------------------------------
Currency % Total Debt % Interest Rate Average
Floating Rate(1)
--------------------------------------------------------------------------------
U.S. dollars 39% 11% 6.36%
Mexican pesos 58% 58% 8.00%
Colombian pesos 2% 100% 10.43%
Brazilian real 1% 100% 22.35%
--------------------------------------------------------------------------------
(1) Annualized average interest rate per currency for the first quarter of 2004.
Debt amortization schedule
Amounts in millions (Local Currency)(1)
--------------------------------------------------------------------------------------------------------
U.S. dollars Mexican pesos Colombian pesos Brazilian real
--------------------------------------------------------------------------------------------------------
2004 $ 153.7 R. 70.5
2005 35.6 Ps. 3,206.9 Col. 65,750
2006 321.8 2,209.0 45,000
2007 70.2 2,913.8 34,250
2008 34.9 4,206.9
2009 and thereafter 340.0 3,150.0
--------------------------------------------------------------------------------------------------------
(1) Debt amortization valued at face value as of March 31, 2004.
17
OPERATING RESULTS BY TERRITORY
We began consolidating the results of our new territories during the second
quarter of 2003 in accordance with Mexican GAAP. Corporacion Interamericana de
Bebidas S.A. de C.V., formerly known as Panamerican Beverages, Inc. ("Panamco")
had historically prepared its financial statements in accordance with U.S. GAAP
and presented financial information in U.S. dollars. We have historically and
will continue to prepare our financial statements in accordance with Mexican
GAAP and present financial information in Mexican pesos. The results of our new
territories in Mexican GAAP and Mexican pesos are different from and may not be
comparable to those reported by Panamco for prior periods. In addition, Panamco
results have not been included in our financial statements for periods prior to
May 2003.
Financial information for the first quarter of 2004 includes three months
results for all of our territories. Coca-Cola FEMSA's financial information
will not be comparable with previous quarters until the third quarter of 2004,
and on a yearly basis, until the end of 2005.
For volume comparison purposes, we included the sales volume figures recorded by
Panamco for the first quarter of 2003.
FIRST QUARTER 2004 SUMMARY:
------------------------------------------------------------------------------------------------------------
Volume (MUC) Operating Income % Total % Operating Margin
(million)
------------------------------------------------------------------------------------------------------------
Mexico 228.3 Ps. 1,181.6 75.1% 19.4%
Central America 26.5 104.9 6.7% 12.6%
Colombia 41.6 36.2 2.3% 4.3%
Venezuela 40.9 65.5 4.2% 6.7%
Brazil 66.4 79.1 5.0% 7.4%
Argentina 37.1 105.6 6.7% 16.9%
------------------------------------------------------------------------------------------------------------
Total 440.8 Ps. 1,572.7 100.0% 15.1%
------------------------------------------------------------------------------------------------------------
MEXICAN OPERATING RESULTS
Revenues
Revenues in the Mexican territories reached Ps.6,097.6 million for the first
quarter of 2004. Average price per unit case was Ps.26.51 (U.S.$2.38). Excluding
Ciel water volumes in 5.0, 19.0 and 20.0 Lt packaging presentations, average
price per unit case was Ps.30.35 (U.S.$ 2.71).
During the quarter Carbonated Soft Drink ("CSD") volumes increased 3.7% as
compared to the same period in 2003. The CSD volume increase was mainly driven
by a 4.3% growth in the cola category. Total sales volume reached 228.3 Million
Unit Cases ("MUC") in the first quarter of 2004, remaining almost flat over the
same period in 2003, due to lower bottled water volumes in our territories which
offset CSD volume growth.
During the first quarter of 2004, we introduced Mundet Multi-flavors in a 2.0 Lt
polyethylene terephtalate ("PET") presentation and 600 ml PET presentation on a
segmented channel basis and brand Coca-Cola in an 8 oz mini-can focusing on the
recovery of consumption of individual servings.
18
Income from Operations
Gross profit totaled Ps.3,232.2 million reaching a 53.4% margin as percentage of
total revenues for the first quarter of 2004. During the quarter we experienced
higher sweetener prices which partially offset PET price decreases as compared
to the fourth quarter of 2003.
Operating profit totaled Ps.1,181.6 million, reaching a 19.4% margin as a
percentage of total revenues. Selling expenses measured by unit case were
impacted by (i) lower fixed cost absorption driven by lower seasonal volumes as
compared to the fourth quarter of 2003, (ii) the standardization of cooler and
distribution fleet maintenance practices in our new territories, and (iii) the
introduction of cooler equipment.
CENTRAL AMERICAN OPERATING RESULTS (Guatemala, Nicaragua, Costa Rica and Panama)
Revenues
Total revenues reached Ps.830.7 million during the first-quarter of 2004.
Average price per unit case was Ps.31.23 (U.S.$2.80) during this period, due to
price increases implemented during the quarter in Costa Rica and in Guatemala,
and a more favorable packaging mix. In the first quarter of 2004, total sales
volume in our Central American territories increased by 7.7% to 26.5 MUC as
compared to the same period in 2003, mainly as a result of the 8.3% growth of
brands Coca-Cola, which accounted for more than 70% of incremental volumes.
In the first quarter of 2004, with the purpose of strengthening our
packaging/product portfolio and developing new price points in the market, we
introduced (i) a 2.0 Lt PET non-returnable for flavors in Nicaragua, (ii) 8 oz,
500 ml and 1.0 Lt returnable glass presentations for brand Coca-Cola in Costa
Rica, and (iii) the upsize of the 500 ml PET flavors presentation to a 600 ml
PET in Panama.
Income from Operations
Gross profit totaled Ps.397.9 million during the first quarter of 2004, reaching
a 48.1% gross margin. During this period the Company experienced raw material
price increases in line with inflation as compared to the fourth quarter of 2003
and lower fixed cost absorption due to the sales volume seasonality of the
business. Operating income totaled Ps.104.9 million during the first quarter of
2004, reaching an operating income margin of 12.6%. During the quarter, the
Company experienced lower administrative and selling expenses derived from the
savings achieved through better practices, mainly in distribution fleet
maintenance, marketing expenses and headcount optimization in prior quarters.
COLOMBIAN OPERATING RESULTS
Revenues
Total revenues reached Ps.848.3 million during the first quarter of 2004, an
average price per unit case of Ps.20.39 (U.S.$1.82). Total sales volume
decreased by 5.9% as compared to the same period in 2003, mainly as a result of
the sales volume decline in bottled water, which accounted for more than 60% of
the volume decrease, and CSDs accounting for the balance. During the quarter, we
launched Coca-Cola vanilla in order to reinvigorate the cola category.
19
Income from Operations
Gross profit totaled Ps.383.9 million during the first quarter of 2004, reaching
a 45.3% gross margin during the same period. Operating income was Ps.36.2
million, reaching a 4.3% margin during the first quarter of 2004. During the
quarter, the company experienced higher marketing expenses as a percentage of
total revenues, related to the introduction of returnable bottles and the
implementation of commercial activities to improve our point of sale execution.
VENEZUELAN OPERATING RESULTS
Revenues
Total revenues reached Ps.980.2 million during the first quarter of 2004 and
average price per unit case in Venezuela reached Ps.23.97 (U.S.$2.15), as a
result of a 13.6% weighted average price increase implemented during the first
quarter of 2004. Despite the price increases implemented during the first
quarter of 2004, our volume increased 44.5% compared to the first quarter of
2003, when political unrest in Venezuela due to a national strike in January of
2003 made it practically impossible for Panamco to run these operations on a
regular basis. The increase was also driven by our packaging and pricing
segmentation strategies implemented during the quarter. During the quarter we
launched Coca-Cola vanilla, in order to expand our existing cola category line,
and a 2.25 Lt PET presentation of Grapette, our existing value protection brand.
Income from Operations
Gross profit totaled Ps.391.4 million during first quarter of 2004, reaching a
39.9% gross margin during the same period. During the quarter, we experienced
raw material price increases due to the devaluation of the Venezuelan Bolivar
versus the U.S. dollar.
Operating income was Ps.65.5 million reaching an operating income margin of 6.7%
during the first quarter of 2004, mainly driven by lower fixed cost absorption
due to the volume seasonality of the business as compared with the fourth
quarter of 2003.
BRAZILIAN OPERATING RESULTS
Revenues
Total revenues reached Ps.1,073.1 million during the first quarter of 2004.
Average price per unit case was Ps.16.12 (U.S.$1.44) during this period, as a
result of the combined effect of (i) revenue management initiatives, which have
been implemented since we took over the operations, and (ii) the reduction of
sales volume concentration in the 2.0 Lt PET presentations, from more than 60%
of total sales volume in the first quarter of 2003 to 56% in the same period of
2004.
During the first quarter of 2004, CSD sales volume in our Brazilian territories
decreased by 6.7% as compared to the same period in 2003, including the
reduction of 23.3% in value protection brands. Beer sales volume, performed by
Kaiser, declined 6.8% in the first quarter of 2004 as compared to the same
period in 2003. During the quarter, sales volume in our cola category remained
almost flat due to the packaging diversification strategy we have been
implementing since May 2003.
20
Income from Operations
Gross profit during the first quarter of 2004 totaled Ps.413.3 million, reaching
a 38.6% margin. Operating income was Ps.79.1 million during the first quarter of
2004, reaching an operating margin of 7.4%, driven by lower fixed cost
absorption due to the volume seasonality of the business as compared with the
fourth quarter of 2003 and higher administrative expenses related to setting up
our Mercosur headquarter in Sao Paulo.
ARGENTINE OPERATING RESULTS
Financial information and sales volume figures in our Argentine operations were
not affected by the Panamco acquisition and therefore are fully comparable with
previous periods.
Revenues
Total revenues reached Ps.625.3 million, a 17.8% increase as compared to the
first-quarter of 2003 and the average price per unit case grew by 1.7% over the
first-quarter of 2003 to Ps.15.94 (U.S.$1.43).
In the first quarter of 2004, total sales volume in our Argentine territory
reached 37.1 MUC, a 17.5% increase as compared to the same period of 2003,
mainly driven by brand Coca-Cola, which represented more than 50.0% of the total
growth and the increase of our sales volume in returnable presentations, which
accounted for 27.5% during the quarter as compared to 22.9% in the same period
of 2003. In the first quarter of 2004 we achieved our best first quarter in the
franchise history, in terms of sales volume and operating income margin.
Income from Operations
Gross profit as a percentage of total revenues, increased by 410 basis points
from 37.3% in the first quarter of 2003 to 41.4% in 2004. This improvement was
the combination of higher sales volume and operating efficiencies achieved
during the quarter, which more than offset increases in raw material prices.
In Argentina, operating expenses as a percentage of total revenues decreased 470
basis points from 27.0% in the first quarter of 2003 to 22.3% in the first
quarter of 2004, as a result of strict cost-control selling initiatives and a
decline in fixed cost administrative expenses related to the migration of
certain executives to the headquarters of our Mercosur division based in Sao
Paulo. Operating income during the first quarter of 2004 in our Argentine
territories was Ps.105.6 million and operating margin grew to 16.9%, an increase
of 910 basis points as compared to first quarter of 2003.
CONFERENCE CALL INFORMATION
Our first-quarter 2004 Conference Call will be held on: April 26, 2004, 10:30
A.M. Eastern Time (9:30 A.M. Mexico City Time). To participate in the conference
call, please dial: Domestic U.S.: 888-396-2383 and International: 617-847-8711.
If you are unable to participate live, an instant replay of the conference call
will be available through May 3, 2004. To listen to the replay please dial:
Domestic U.S.: 888- 286-8010 or International: 617-801-6888. Pass code:
98344233.
21
Coca-Cola FEMSA, S.A. de C.V. produces Coca-Cola, Sprite, Fanta, Lift and other
trademark beverages of The Coca-Cola Company in Mexico (a substantial part of
central Mexico, including Mexico City and Southeast of Mexico), Guatemala
(Guatemala City and surrounding areas), Nicaragua (nationwide), Costa Rica
(nationwide), Panama (nationwide), Colombia (most of the country), Venezuela
(nationwide), Brazil (greater Sao Paulo, Campinas, Santos, the state of Mato
Grosso do Sul and part of the state of Goias) and Argentina (federal capital of
Buenos Aires and surrounding areas), along with bottled water, beer and other
beverages in some of these territories.
The Company has 32 bottling facilities in Latin America and serves more than
1,500,000 retailers in the region. Coca-Cola FEMSA currently accounts for almost
10% of Coca-Cola global sales, approximately 40% of all Coca-Cola sales in Latin
America. The Coca-Cola Company owns a 39.6% equity interest in Coca-Cola FEMSA.
Figures for the Company's operations in Mexico and its consolidated
international operations were prepared in accordance with Mexican generally
accepted accounting principles ("Mexican GAAP"). All figures are expressed in
constant Mexican pesos with purchasing power at March 31, 2004. For comparison
purposes, 2003 and 2004 figures from the Company's operations have been restated
taking into account local inflation of each country with reference to the
consumer price index and converted from local currency into Mexican pesos using
the exchange rate as of the end of the period. In addition, all comparisons in
this report for the first quarter of 2004, which ended on March 31, 2004, are
made against the figures for the comparable period in 2003, unless otherwise
noted.
This news release may contain forward-looking statements concerning Coca-Cola
FEMSA's future performance and should be considered as good faith estimates by
Coca-Cola FEMSA. These forward-looking statements reflect management's
expectations and are based upon currently available data. Actual results are
subject to future events and uncertainties, many of which are outside Coca-Cola
FEMSA's control that could materially impact the Company's actual
performance.
References herein to "U.S.$" are to United States dollars. This news release
contains translations of certain peso amounts into U.S. dollars for the
convenience of the reader. These translations should not be construed as
representations that the peso amounts actually represent such U.S. dollar
amounts or could be converted into U.S. dollars at the rate indicated.
(5 pages of tables to follow)
22
Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
Consolidated Balance Sheet
As of March 31, 2004 and December 31, 2003
Millions of Mexican pesos (Ps.)
Expressed in currency with purchasing power as of March 31, 2004
ASSETS 2004 2003 LIABILITIES & STOCKHOLDERS' EQUITY 2004 2003
------------------------------------------------------- -------------------------------------------------------------
Current Assets Current Liabilities
Cash and cash equivalents Ps. 2,533 Ps. 2,835 Short-term bank loans and notes Ps. 2,007 Ps. 3,010
------------------------------------------------------- Interest payable 380 380
Accounts receivable: Suppliers 3,485 3,443
Trade 1,023 1,360 Accounts payable and others 2,043 1,699
Notes 104 87 Taxes payable 952 1,050
Prepaid taxes 644 1,106 -------------------------------------------------------------
Other 560 396 Total Current Liabilities 8,867 9,582
------------------------------------------------------- -------------------------------------------------------------
Total accounts receivable 2,331 2,949 Long-term bank loans 25,588 26,476
------------------------------------------------------- Pension plan and seniority premium 591 595
Inventories 2,320 2,228 Other liabilities 2,940 2,621
Prepaid expenses 211 205 -------------------------------------------------------------
------------------------------------------------------- Total Liabilities 37,986 39,274
Total current assets 7,395 8,217 -------------------------------------------------------------
------------------------------------------------------- Stockholders' Equity
Property, plant and equipment -------------------------------------------------------------
Land 2,375 2,531 Minority interest 81 167
Buildings, machinery and equipment 24,835 24,552 -------------------------------------------------------------
Accumulated depreciation -10,834 -10,617 Majority interest
Construction in progress 645 681 Capital stock 2,697 2,697
Bottles and cases 946 973 Additional paid in capital 11,540 11,540
------------------------------------------------------- Retained earnings of prior years 11,417 9,585
Total property, plant and equipment 17,967 18,120 Net income for the period 868 2,353
------------------------------------------------------- Cumulative results of holding non-
Investment in shares 519 538 monetary assets -3,010 -3,139
Deferred charges, net 1,372 1,352 -------------------------------------------------------------
Intangibles 34,326 34,250 Total majority interest 23,512 23,036
------------------------------------------------------- -------------------------------------------------------------
TOTAL ASSETS Ps. 61,579 Ps. 62,477 Total stockholders' equity 23,593 23,203
======================================================= -------------------------------------------------------------
TOTAL LIABILITIES & EQUITY Ps.61,579 Ps.62,477
=============================================================
23
Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
INCOME STATEMENT
For the three months ended March 31, 2004 and 2003
Expressed in million of Mexican pesos(1) with purchasing power
as of March 31, 2004
-------------------------- -------------------- ---------------- --------------------
Consolidated Mexican Central American Colombian
Operations Operations Operations
-------------------------- -------------------- ------------------------------------
%Total %Total %Total
2004 2003 % VAR 2004 Revenues 2004 Revenues 2004 Revenues
----------------------------------- -------------------------- -------------------- --------------- --------------------
Sales Volume (millions unit cases) 440.8 150.2 193.5 228.3 26.5 41.6
Average unit price per unit case 23.52 28.65 (17.9) 26.51 31.23 20.39
----------------------------------- -------------------------- ----------- ------ -----------
Net revenues 10,367.4 4,303.5 140.9 6,052.1 827.2 848.3
Other operating revenues 71.6 53.1 34.8 45.5 3.5 -
----------------------------------- -------------------------- -------------------- --------------- --------------------
Total revenues 10,439.0 4,356.6 139.6 6,097.6 100.0 830.7 100.0 848.3 100.0
Cost of sales 5,388.6 2,100.6 156.5 2,865.4 47.3 432.8 52.3 464.4 54.8
----------------------------------- -------------------------- -------------------- --------------- --------------------
Gross profit 5,050.4 2,256.0 123.9 3,232.2 53.4 397.9 48.1 383.9 45.3
----------------------------------- -------------------------- -------------------- --------------- --------------------
Administrative expenses 601.6 337.9 78.0 354.1 5.8 60.2 7.2 48.1 5.7
Selling expenses 2,876.1 873.4 229.3 1,696.5 27.8 232.8 28.0 299.7 35.3
----------------------------------- -------------------------- -------------------- --------------- --------------------
Operating expenses 3,477.7 1,211.3 187.1 2,050.6 33.6 293.0 35.3 347.8 41.0
----------------------------------- -------------------------- -------------------- --------------- --------------------
Goodwill amortization - 5.9 (100.0) - - - - - -
----------------------------------- -------------------------- -------------------- --------------- --------------------
Operating income 1,572.7 1,038.8 51.4 1,181.6 19.4 104.9 12.6 36.2 4.3
----------------------------------- -------------------------- -------------------- --------------- --------------------
Interest expense 577.9 98.9 484.4
Interest income 32.2 67.1 (52.0)
Interest expense, net 545.8 31.8 1,616.2
Foreign exchange loss (gain) (58.6) 19.4 (402.2)
Loss (gain) on monetary position (460.2) 17.3 (2,760.1)
----------------------------------- --------------------------
Integral cost of financing 26.9 68.5 (60.7)
Other (income) expenses, net 66.2 57.8 14.6
----------------------------------- --------------------------
Income before taxes 1,479.5 912.5 62.1
Taxes 611.0 421.6 44.9
----------------------------------- --------------------------
Consolidated net income 868.6 490.9 76.9
----------------------------------- --------------------------
Majority net income 868.4 490.9 76.9
--------------------------
Minority net income 0.2 - -
----------------------------------- -------------------------- -------------------- --------------- --------------------
Non-cash items (2) 569.6 222.4 156.1 339.0 5.6 56.5 6.8 67.0 7.9
----------------------------------- -------------------------- -------------------- --------------- --------------------
(1) Except volume and average price per unit case figures.
(2) Depreciation, amortization and other non-cash items (including returnable
bottle breakage expense).
24
Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
INCOME STATEMENT
For the three months ended March 31, 2004 and 2003
Expressed in million of Mexican pesos(1) with purchasing power as of
March 31, 2004
----------------- -------------------- ------------------------------------
Venezuelan Brazilian Argentine Operations
Operations Operations
-------------------------------------- ------------------------------------
% Total % Total % Total % Total % VAR
2004 Revenues 2004 Revenues 2004 Revenues 2003 Revenues
------------------------------------------ ----------------- -------------------- ------------------------------------
Sales Volume(millions unit cases) 40.9 66.4 37.1 31.6 17.5
Average unit price per unit case 23.97 16.12 15.94 15.67 1.7
------------------------------------------ -------- ----------- ------ ------ ------
Net revenues 979.7 1,070.6 591.9 495.3 19.5
Other operating revenues 0.5 2.5 33.4 35.7 (6.4)
------------------------------------------ ----------------- -------------------- ------------------------------------
Total revenues 980.2 100.0 1,073.1 100.0 625.3 100.0 531.0 100.0 17.8
Cost of sales 588.8 60.1 659.7 61.6 380.4 64.3 346.2 69.9 9.9
------------------------------------------ ----------------- -------------------- ------------------------------------
Gross profit 391.4 39.9 413.3 38.6 244.9 41.4 184.8 37.3 32.5
------------------------------------------ ----------------- -------------------- ------------------------------------
Administrative expenses 53.4 5.4 85.2 7.9 13.8 2.2 30.0 5.6 (54.0)
Selling expenses 272.5 27.8 249.0 23.2 125.6 20.1 113.3 21.3 10.9
------------------------------------------ ----------------- -------------------- ------------------------------------
Operating expenses 325.9 33.2 334.2 31.1 139.4 22.3 143.3 27.0 (2.7)
------------------------------------------ ----------------- -------------------- ------------------------------------
Goodwill amortization - - - - - - - - na
------------------------------------------ ----------------- -------------------- ------------------------------------
Operating income 65.5 6.7 79.1 7.4 105.6 16.9 41.5 7.8 154.2
------------------------------------------ ----------------- -------------------- ------------------------------------
Interest expense
Interest income
Interest expense, net
Foreign exchange loss (gain)
Loss (gain) on monetary position
------------------------------------------
Integral cost of financing
Other (income) expenses, net
------------------------------------------
Income before taxes
Taxes
------------------------------------------
Consolidated net income
------------------------------------------
Majority net income
Minority net income
------------------------------------------ ----------------- -------------------- ------------------------------------
Non-cash items (2) 56.0 5.7 20.4 1.9 30.7 4.9 46.2 8.7 (33.5)
------------------------------------------ ----------------- -------------------- ------------------------------------
(1) Except volume and average price per unit case figures.
(2) Depreciation, amortization and other non-cash items (including returnable
bottle breakage expense).
25
SELECTED INFORMATION
For the three months ended March 31, 2004 and 2003
Expressed in million Mexican pesos as of March 31, 2004
----------- -------------
1Q 2003 1Q 2004
--------------------------- ---------------------------
Capex 364.1 Capex 409.0
--------------------------- ---------------------------
Depreciation 125.6 Depreciation 307.4
--------------------------- ---------------------------
Amortization Amortization &
& Others 96.8 Others 262.2
--------------------------- ---------------------------
VOLUME (MUC)
Expressed in million unit cases
-------------------------------------- --------------------------------------------
1Q 2003 1Q 2004
-------------------------------------- --------------------------------------------
Colas Flavors Water Beer Others Total Colas Flavors Water Beer Others Total
--------------------------------------------------------------------------- --------------------------------------------
Mexico (1) 133.3 43.1 50.2 0.0 1.5 228.1 139.0 43.9 44.4 0.0 1.0 228.3
Central America 16.6 6.3 1.1 0.0 0.6 24.6 18.0 6.8 1.2 0.0 0.5 26.5
Colombia 27.0 9.6 7.5 0.0 0.1 44.2 26.6 9.0 5.9 0.0 0.1 41.6
Venezuela 16.5 8.0 2.3 0.0 1.5 28.3 22.7 12.0 3.7 0.0 2.5 40.9
Brazil 37.2 18.5 3.0 11.7 0.5 70.9 37.1 14.9 3.1 10.9 0.4 66.4
Argentina 22.1 9.0 0.4 0.0 0.1 31.6 25.3 11.4 0.3 0.0 0.1 37.1
--------------------------------------------------------------------------- --------------------------------------------
Total 252.7 94.5 64.5 11.7 4.3 427.7 268.7 98.0 58.6 10.9 4.6 440.8
--------------------------------------------------------------------------- --------------------------------------------
(1) Water volume includes 3.1 MUC and 2.1 MUC of Ciel 5.0 Lt presentation in
1Q2003 and 1Q2004, respectively.
PACKAGE MIX BY PRESENTATION
Expressed as a percentage of Total Volume
-------------------------- --------------------------------
1Q 2003 1Q 2004
-------------------------- --------------------------------
Ret Non-Ret Fountain Jug Ret Non-Ret Fountain Jug
--------------------------------------------------------------- --------------------------------
Mexico (1) 27.0 54.9 1.3 16.8 28.8 55.2 1.3 14.7
Central America 49.9 44.3 5.8 - 52.7 42.5 4.8 -
Colombia 52.4 37.4 2.6 7.6 53.2 37.0 3.1 6.7
Venezuela 33.5 60.9 2.5 3.1 32.1 61.0 2.6 4.3
Brazil 10.7 85.6 3.7 - 10.2 87.0 2.8 -
Argentina 22.9 73.2 3.9 - 27.5 69.1 3.4 -
--------------------------------------------------------------- --------------------------------
26
March 2004
Macroeconomic Information
------------------------------- ----------------
Foreign
Inflation Exchange Rate
LTM YTD 1Q 2004 (Per US Dollar)*
------------------------------- ----------------
------------ ------------------------------- ----------------
Mexico 4.23% 1.57% 1.57% 11.17
Colombia 5.98% 2.87% 2.87% 2,678.16
Venezuela 23.56% 6.35% 6.35% 1,920.00
Brazil 6.50% 1.72% 1.72% 2.91
Argentina 2.72% 0.80% 0.80% 2.86
------------ ------------------------------- ----------------
* Figures as of March 31, 2004
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FOMENTO ECONOMICO MEXICANO, S.A. DE C.V.
By: /s/ Federico Reyes
----------------------------
Federico Reyes
Chief Financial Officer
Date: April 26, 2004