SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of October 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, Nuevo Leon 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 or Form 40-F:
Form 20-F |X| Form 40-F |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant 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-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
FOMENTO ECONOMICO MEXICANO, S.A. DE C.V.
By: /s/ Federico Reyes
-----------------------
Federico Reyes
Chief Financial Officer
Date: October 27, 2004
[LOGO] FEMSA
Investor Contact:
Juan F. Fonseca
(52) 818-328-6245
juan.fonseca@femsa.com.mx
Alan Alanis
(52) 818-328-6211
alan.alanis@femsa.com.mx
Media Contact:
Jaime Toussaint
(52) 818-328-6202
jtouelo@femsa.com.mx
Carolina Alvear
(52) 818-328-6046
calvsev@femsa.com.mx
[LOGO] [SEAL]
FMX --------
LISTED FEMSAUBD
NYSE
FEMSA reports solid operating
results for the third quarter and
first nine months of 2004
Monterrey, Mexico, October 27, 2004 -- Fomento Economico Mexicano, S.A. de C.V.
("FEMSA") (NYSE: FMX; BMV: FEMSA UBD, FEMSA UB), the largest integrated beverage
company in Latin America, today reported its operational and financial results
for the third quarter and first nine months of 2004.
Business Highlights
o FEMSA Consolidated total revenues increased 6.8% and income from operations
was up 6.6% during 3Q04 driven by steady performance at our main business units.
o FEMSA Cerveza domestic volume increased 4.3% during 3Q04 and income from
operations rose 4.6%. We continued to experience positive sales trends
throughout all our Mexican territories by leveraging our new business model.
o Coca-Cola FEMSA's income from operations increased 9.0% during the quarter.
Operating margin expanded year-over-year in all international operations and
sequentially in Mexico.
o FEMSA Comercio added 173 net new Oxxo stores during the quarter, now totaling
3,259 locations nationwide, 718 more stores than a year ago.
October 27, 2004 1
[LOGO] FEMSA
Jose Antonio Fernandez, Chairman and CEO of FEMSA, commented, "I am pleased to
report another quarter where we made solid progress in the implementation of our
beverage strategy. As you know, in late August we finalized the transaction
whereby we repurchased 30% of FEMSA Cerveza and unwound our business
relationship with Interbrew. We are moving swiftly to leverage our renewed
flexibility and are making progress in the design of the business plan for our
U.S. exports together with Heineken USA. In the key domestic beer market, we are
on track in our transformation efforts with very positive results.
At Coca-Cola FEMSA, we achieved operating margin expansion in most of our
territories. It is increasingly evident that the acquisition of our new
territories is supporting our growth through the diversification of revenues and
profit sources throughout Latin America.
Finally, FEMSA Comercio advanced in the consolidation of Oxxo's leadership
position in the market while continuing to improve the value proposition in its
stores, with a view to continue increasing same-store sales performance by
better identifying and serving customers' needs.
We are optimistic about the road ahead and we will keep the pace. There is much
work to be done in our pursuit to create long-term shareholder value."
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 presented in this report for Coca-Cola FEMSA
("KOF") and for FEMSA consolidated for the nine months ended September 30, 2004
are not comparable to the nine months ended September 30, 2003. Operating
results for the third quarter ended September 30, 2004, however are fully
comparable with the third quarter of 2003. Our annual results will be fully
comparable to the previous year once we report for full year 2005.
October 27, 2004 2
[LOGO] FEMSA
DISCUSSION OF FINANCIAL RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 2004 COMPARED TO THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER
30, 2003.
FEMSA
FEMSA total revenues increased by 6.8% to Ps. 23.702 billion during 3Q04 from
Ps. 22.195 billion during 3Q03. Almost 90% of the increase in total revenues is
related to the growth at FEMSA Comercio, which added 718 net new convenience
stores in the last twelve months.
For the first nine months of 2004, our consolidated total revenues increased by
21.4% to Ps. 68.282 billion from Ps. 56.223 billion during the same period of
2003. The increase in total revenues was driven by growth in every one of our
main operating companies, with most of the increase due to the inclusion of the
new Coca-Cola FEMSA territories, and the growth in net new Oxxo stores at FEMSA
Comercio.
Cost of sales increased to Ps. 12.520 billion during 3Q04 compared to Ps. 11.521
billion during the same period of 2003, an increase of 8.7%. Most of this
increase was due to an increase in the net number of Oxxo stores, and to a
lesser extent, a higher cost of sales at FEMSA Cerveza. Gross margin decreased
90 basis points to 47.2% of total revenues during 3Q04 compared to 48.1% during
3Q03. This was primarily due to the higher proportion of the lower margin
operations of FEMSA Comercio in FEMSA's consolidated results, as well as slight
contractions in the gross margins of FEMSA Cerveza and FEMSA Empaques.
Our cost of sales increased to Ps. 36.190 billion during the first nine months
of 2004 compared to Ps. 29.187 billion during the first nine months of 2003, an
increase of 24.0%. Nearly two-thirds of the increase was due to the inclusion of
the new Coca-Cola FEMSA territories, while most of the remaining third was due
to an increase in the net number of Oxxo stores. Our gross margin decreased 110
basis points to 47.0% of total revenues during the first nine months of 2004
compared to 48.1% for the same period of 2003.
Income from operations increased by 6.6% to Ps. 3.613 billion during 3Q04,
resulting in an operating margin of 15.2%. The observed margin contraction of 10
basis points from 3Q03 primarily resulted from the net effect of declines in the
operating margins of FEMSA Empaques and FEMSA Comercio, partially offset by
improvements in the operating margins of FEMSA Cerveza and Coca-Cola FEMSA.
For the first nine months of 2004, income from operations increased by 13.2%
reaching Ps. 9.932 billion compared to Ps. 8.776 billion for the first nine
months of 2003. The consolidated operating margin decreased 110 basis points
from the same period of 2003 to 14.5% of total revenues. This margin contraction
resulted from the net effect of a decrease in the operating margins of Coca-Cola
FEMSA, FEMSA Comercio, and FEMSA Empaques, which was partially offset by a 110
basis point improvement in the operating margin of FEMSA Cerveza.
October 27, 2004 3
[LOGO] FEMSA
Net interest expense amounted to Ps. 716 million during 3Q04, compared to Ps.
807 million during 3Q03, due to the net effect of (1) increased debt from the
purchase of 30% of FEMSA Cerveza during 3Q04, and (2) a favorable comparison to
3Q03, when we recognized a one-time commission charge related to the prepayment
of debt incurred for the Panamco acquisition. For the first nine months of 2004,
net interest expense amounted to Ps. 2.229 billion compared to Ps. 1.437 billion
for the first nine months of 2003. This increase is primarily related to
interest expense related to debt incurred by Coca-Cola FEMSA to acquire Panamco
in May 2003.
Foreign exchange gain (loss) amounted to a gain of Ps. 62 million during 3Q04.
This was a significant improvement from the loss of Ps. 1.164 billion during
3Q03. The Ps. 62 million gain is due to the appreciation of 1.18% of the Mexican
peso against the U.S. dollar during 3Q04 applied to our U.S. dollar-denominated
liabilities and a foreign exchange gain on the cash obtained to repurchase 30%
of FEMSA Cerveza that was part of our cash balance for two months of the third
quarter. The Mexican peso depreciated 1.26% in nominal terms versus the U.S.
dollar during the first nine months of 2004 moving from 11.235 pesos per U.S.
dollar on December 31, 2003 to 11.376 pesos per U.S. dollar on September 30,
2004. For the first nine months of 2004, foreign exchange loss amounted to a
loss of Ps. 108 million compared to a loss of Ps. 2.151 billion in the same
period of 2003 related to the devaluation of the Mexican peso against the debt
incurred by Coca-Cola FEMSA to acquire Panamco.
Monetary position gain (loss) amounted to a gain of Ps. 588 million during 3Q04,
compared to a gain of Ps. 481 million during 3Q03. For the first nine months of
2004, the monetary position amounted to a gain of Ps. 1.138 billion, compared to
a gain of Ps. 517 million during the same period of 2003. This gain reflects the
inflationary impact on our higher net liabilities recorded during the period.
Tax recognized during 3Q04 amounted to Ps. 1.290 billion, which includes income
tax, tax on assets, and employee profit sharing ("taxes"), compared to Ps. 653
million during 3Q03. For the first nine months of 2004, taxes amounted to Ps.
3.242 billion, compared to Ps. 2.004 billion for the same period of 2003. The
effective tax rate for the first nine months of 2004 was 38.2%, compared to the
40.1% effective tax rate for the same period in 2003.
Extraordinary gain.
As mentioned in our second quarter 2004 press release, in May 2004 our
subsidiary Coca-Cola FEMSA obtained a favorable final ruling from a Mexican
federal court allowing it to deduct losses arising from a sale of shares during
2002. As a result of the ruling, our consolidated net income increased by Ps.
1.195 billion for the first nine months of 2004 as compared to the same period
in 2003.
Net income amounted to Ps. 2.245 billion during 3Q04, up 98.1% with respect to
3Q03. For the first nine months of 2004, net income increased 115.6% to Ps.
6.442 billion from Ps. 2.988 billion during the same period in 2003.
October 27, 2004 4
[LOGO] FEMSA
Net majority income per FEMSA Unit1 was Ps. 1.303 in 3Q04 and Ps. 3.654 for the
first nine months of 2004. Net majority income per FEMSA ADS, assuming an
exchange rate of Ps. 11.376 per dollar, was US$ 3.21 for the first nine months
of 2004. Consolidated net majority income amounted to Ps. 3.871 billion for the
first nine months of 2004, 81.1% higher than the same period of 2003.
Capital expenditures amounted to Ps. 1.742 billion and Ps. 4.680 billion for
3Q04 and the first nine months of 2004, respectively.
Consolidated debt. As of September 30, 2004, FEMSA recorded a cash balance of
Ps. 7.683 billion (US$ 675 million), short-term debt of Ps. 8.050 billion (US$
708 million) and long-term debt of Ps. 39.208 billion (US$ 3,447 million).
FEMSA's consolidated net debt balance (the sum of short-term debt, plus
long-term debt, minus cash balance) increased by US$ 996 million as of September
30, 2004 from June 30, 2004. This increase is a result of the additional debt
incurred for the repurchase of the remaining 30% of FEMSA Cerveza that took
place on August 31, 2004. FEMSA intends to repay approximately US$ 500 million
of this new debt with proceeds of an equity offering (please refer to section
below: FEMSA equity issuance to finance part of the acquisition of 30% of FEMSA
Cerveza).
As of September 30, 2004, approximately 50.5% of FEMSA's consolidated total debt
had fixed interest rates, while the remaining 49.5% had variable interest rates.
Our currency breakdown was as follows: 35.0% of our total debt was denominated
in U.S. dollars, 63.6% in Mexican pesos, and 1.4% in Colombian pesos. The
weighted average interest rates of our debt were approximately 9.1%, 4.5%, and
10.2% for Mexican peso, U.S. dollar, and Colombian peso-denominated debt,
respectively. The nominal weighted average annual interest rate for our total
debt was 7.5% as of September 30, 2004.
Recent Developments:
"Six" stores transferred from FEMSA Cerveza to FEMSA Comercio.
As mentioned in the first quarter 2004 FEMSA press release, 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 increased FEMSA Cerveza's ability to focus on its
core operations, while providing FEMSA Comercio with a number of proven
locations.
In order to assure comparability, and in accordance with accounting rules, for
3Q03 and first nine months of 2003, we have taken the financial results of these
"Six" stores from FEMSA Cerveza and incorporated them into FEMSA Comercio. The
information presented in this press release is based on these reclassified
figures for the third quarter and first nine months of 2003. This change has no
impact on FEMSA Consolidated figures. For further details, please see the
attached financial tables.
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(1) FEMSA Units consist of FEMSA BD units and FEMSA B units. Each FEMSA BD unit
is comprised of one Series B share, two Series D-B shares and two Series D-L
shares. Each FEMSA B unit is comprised of five Series B shares. The number of
FEMSA Units outstanding as of September 30, 2004 was 1,059,462,090, equivalent
to the total number of shares of FEMSA outstanding as of September 30, 2004
divided by 5.
October 27, 2004 5
[LOGO] FEMSA
FEMSA equity issuance to finance part of the acquisition of 30% of FEMSA
Cerveza.
As reported in our second quarter results, on July 27, 2004 our shareholders
approved the issuance of up to 344 million Series B shares and up to 322 million
Series D-B and D-L shares, which represent up to 52.8 million B Units and up to
80.5 million BD Units. We expect to sell these Units in offerings in Mexico and
in the form of ADSs outside of Mexico. The number of shares authorized for sale
includes any shares that might be required to satisfy an over-allotment option
on the BD Units that may be granted to the underwriters. Prior to the
commencement of the offerings, we will determine the exact number of Units to be
offered. Any authorized shares in excess of those constituting the Units in the
offerings (and the over-allotment option) will be cancelled. Our expectation is
that our total proceeds from the offerings will range from US$ 500 million to
US$ 550 million. The proceeds from the offerings will be used to repay debt
incurred in connection with our repurchase of 30% of FEMSA Cerveza, which took
place in August 2004. For more information about this repurchase please refer to
our August 31, 2004 press release titled "FEMSA and Interbrew complete
transaction unwinding relationship".
A registration statement relating to these securities has been filed with the
U.S. Securities and Exchange Commission but has not yet become effective. The
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy any securities. There shall be no sale of any securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration under the securities laws of such jurisdiction.
Reclassification following the acquisition of 30% of FEMSA Cerveza.
The participation of affiliated companies, which mainly related to results from
Labatt USA, is now stated below the operating income line.
FEMSA Empaques' core operations to be merged into FEMSA Cerveza during 4Q04.
As another step towards our integrated beverage model, on October 26, the Board
of Directors approved the integration of FEMSA Empaques' core operations into
FEMSA Cerveza. Specifically, the operations in glass bottles and cans will be
consolidated into FEMSA Cerveza, with the other non-core and smaller operations
remaining at FEMSA Empaques. For reporting purposes, FEMSA Empaques will cease
to appear as a separate business starting with our 4Q04 and full year 2004
results. In our next quarterly press release we will provide reclassified
figures for full comparability of our 4Q04 and full year 2004 results with
previous periods.
Coca-Cola FEMSA
Coca-Cola FEMSA's financial results and discussion are incorporated by reference
from Coca-Cola FEMSA's press release attached to this press release.
October 27, 2004 6
[LOGO] FEMSA
FEMSA Cerveza
Domestic sales volume grew by 4.3% to 6.048 million hectoliters during 3Q04,
primarily due to increased sales throughout all of Mexico led by our Sol, Indio,
and Tecate Light brands. For the first nine months of 2004, domestic sales
volume grew by 4.1% to 17.443 million hectoliters. We attribute these positive
results to several key initiatives. For instance, we continue to (1) drive
innovation in our packaging and product portfolio, and we have had particular
success with the re-launching of Tecate Light, the roll-out of Sol Brava
throughout Central Mexico, and the launching of non-returnable Sol at a premium
price in our Northwest Mexico territories, (2) expand our coverage, therefore
improving the availability of our products for the consumer, (3) improve our
execution at the point of sale, and (4) start to leverage some functionality
from our Enterprise Resource Planning ("ERP") system, which is currently
operational in 68% of total direct domestic volume, allowing us to implement
micro-segmented strategies in some territories.
Export sales volume increased by 1.4% to 0.609 million hectoliters during 3Q04.
This slower pace of growth was primarily due to inventory build-up experienced
at our U.S. wholesalers during the first half of 2004. As evidence of this,
depletions in the U.S. market (sales from wholesalers to points of sale)
increased by 8.1% during 3Q04 compared to 3Q03.
For the first nine months of 2004, export sales volume increased by 14.6% to
1.788 million hectoliters. Depletions in the U.S. market increased by 11.4%,
with the remaining growth coming from inventory build-up at wholesalers. The
11.4% increase in depletions was primarily due to continued successful marketing
strategies for our Tecate and Dos Equis brands, and an overall improvement in
the U.S. economy.
Total revenues increased by 4.1% to Ps. 5.947 billion during 3Q04, resulting
from total volume growth of 4.0% and a 2.8% year-over-year increase in Mexican
peso terms of our export revenue per hectoliter. Domestic revenue per hectoliter
increased by 4.8% in nominal terms during 3Q04; however, as a result of
inflation of 5.1% over the last twelve months, real domestic revenue per
hectoliter decreased by 0.3% principally due to an increase in selective
promotional activity during the quarter. For the first nine months of 2004,
total revenues increased by 5.0% to Ps. 17.161 billion from Ps. 16.338 billion
during the same period of 2003. Domestic revenues represented 92% of the total,
while the remaining 8% came from exports.
Cost of sales increased by 7.3% to Ps. 2.517 billion during 3Q04 from Ps. 2.346
billion during 3Q03. This was due to (1) 4.0% growth in total sales volume, (2)
a higher percentage of non-returnable presentations in our product portfolio
mix, and (3) a per hectoliter increase in the cost of some of energy and barley.
For the first nine months of 2004, cost of sales increased by 5.9%, slightly
ahead of total volume growth, reaching Ps. 7.212 billion compared to Ps. 6.809
billion during the same period of 2003.
October 27, 2004 7
[LOGO] FEMSA
Gross profit increased by 1.8% to reach Ps. 3.430 billion during 3Q04. Our gross
margin decreased by 130 basis points to 57.7% of total revenues compared to
59.0% during 3Q03. For the first nine months of 2004, gross profit totaled Ps.
9.949 billion, resulting in a gross margin of 58.0%, 30 basis points lower than
the same period of 2003.
Administrative expenses increased by 5.0% to Ps. 623 million during 3Q04
compared to Ps. 594 million in 3Q03 due to Enterprise Resource Planning System
("ERP") related expenses. For the first nine months of 2004, administrative
expenses increased by 5.8% to Ps. 1.892 billion compared to Ps. 1.788 billion
during the same period of 2003.
Selling expenses decreased by 1.5% to Ps. 1.572 billion during 3Q04 compared to
Ps. 1.595 billion in 3Q03, due to various expense containment initiatives
throughout our company. For the first nine months of 2004, selling expenses
decreased by 0.4% to Ps. 4.684 billion.
Operating expenses (administrative plus selling expenses) as a percentage of
total revenues decreased 140 basis points from 38.3% in 3Q03 to 36.9% in 3Q04 as
a result of higher sales volumes and more effective management of operating
expenses. For the first nine months of 2004 compared to the same period of 2003,
operating expenses as a percentage of total revenues decreased 140 basis points
from 39.7% to 38.3%.
Operating income (before deduction of management fees) increased by 4.6% to Ps.
1.235 billion during 3Q04 compared to Ps. 1.181 billion during 3Q03. Operating
margin (before management fees) increased 10 basis points to 20.8% of total
revenues. This increase reflects stable real prices, solid volume growth, and a
more efficient use of operating expenses that was offset by an increase in cost
of sales. For the first nine months of 2004, operating income (before management
fees) increased by 11.0% to Ps. 3.374 billion from Ps. 3.038 billion in the same
period of 2003. Operating margin (before management fees) increased 110 basis
points to 19.7% of total revenues reflecting stable real prices, solid volume
growth, and a more efficient use of operating expenses.
FEMSA Comercio
Total revenues increased by 28.6% to Ps. 5.974 billion during 3Q04 from Ps.
4.647 billion during 3Q03. As of September 30, 2004, we had 3,259 convenience
stores nationwide, an increase of 718 net new stores from September 30, 2003.
Oxxo continues to rapidly consolidate its position as the leading chain of
convenience stores in Mexico. For the first nine months of 2004, total revenues
increased by 24.3% to Ps. 16.277 billion from Ps. 13.097 billion the same period
of 2003.
October 27, 2004 8
[LOGO] FEMSA
Oxxo same store sales increased by an average of 10.2% during 3Q04, reflecting
an increase of 5.8% in the average ticket and an increase of 4.2% in store
traffic. The expansion achieved in the average ticket and same store sales
figures continues to reflect the rapid pace of expansion as well as stronger
category management practices that enabled Oxxo to improve the mix of products
within its stores. For the first nine months of 2004, Oxxo same store sales
increased an average of 8.6%, reflecting an increase of 4.7% in the average
ticket and an increase of 3.7% in store traffic.
Gross profit reached Ps. 1.586 billion during 3Q04, which represents a stable
gross margin of 26.5% of total revenues when compared to the 26.4% registered in
3Q03. For the first nine months of 2004, gross profit increased 24.9% to Ps.
4.272 billion compared to Ps. 3.419 billion during the same period of 2003.
Therefore, year-to-date gross margin increased slightly to 26.2% of total
revenues.
Administrative expenses increased by 61.2% to Ps. 110 million during 3Q04
compared to 3Q03. Over 70% of this increase resulted from expenses and
amortization of new IT systems investments that can no longer be capitalized,
with the remaining amount resulting from increased expenses in personnel
training and development and the opening of three new sales regions in Morelia,
Juarez, and La Paz. For the first nine months of 2004, administrative expenses
increased by 51.8% to Ps. 317 million compared to the first nine months of 2003.
Selling expenses increased by 32.1% to Ps. 1.230 billion during 3Q04, increasing
60 basis points to 20.6% of total revenues. For the first nine months of 2004,
selling expenses increased at a slightly higher rate than revenues to Ps. 3.301
billion, or 20.3% of total revenues, mainly as a result of an increase in the
net number of Oxxos that have not reached their on-going sales level, as well as
higher advertising spending in order to reinforce the brand equity of Oxxo. In
addition to increasing the net number of stores, we are also significantly
improving our existing store base.
Operating income (before deduction of management fees) increased by 7.4% to Ps.
246 million, resulting in an operating margin of 4.1% for 3Q04, 80 basis point
lower than 3Q03. For the first nine months of 2004, operating income increased
by 13.4% to Ps. 654 million, resulting in an operating margin of 4.0%, 40 basis
points lower than the same period of 2003. However, the impact of our strategic
initiatives is already visible in same store sales improvements, growth in store
traffic, and in the average ticket as we leverage our brand to rapidly expand
the Oxxo chain. While the current investment is outpacing returns in the
short-run, the impact of continued investment in the development of our Oxxo
chain is ultimately aimed at growing our profitability in future years.
October 27, 2004 9
[LOGO] FEMSA
FEMSA Empaques
Total revenues increased by 6.2% to Ps. 2.101 billion during 3Q04. This increase
was attributed to strong volume growth as follows: (1) a 16.8% net increase in
the sales volume of glass bottles, mainly due to strong demand from FEMSA
Cerveza, (2) a 18.9% net increase in the sales volume of crown caps, mainly due
to a surge in demand from third parties, primarily exports, (3) a 11.3% net
increase in the sales volume of beverage cans, and (4) the depreciation of the
Mexican peso, which offset a decrease in the average price of these products in
U.S. dollar terms.
For the first nine months of 2004, total revenues increased by 8.1% to Ps. 6.053
billion from Ps. 5.598 billion during the same period of 2003.
Gross profit reached Ps. 470 million during 3Q04 resulting in a gross margin of
22.3% compared to 24.3% for 3Q03. The 200 basis point margin contraction from
3Q03 is primarily due to an increase in the cost of dollar-denominated raw
materials, in particular aluminum and steel, and to a lesser extent, the opening
of new regional offices for servicing our refrigerated equipment operations.
For the first nine months of 2004, gross profit reached Ps. 1.372 billion
resulting in a gross margin of 22.7%.
Administrative expenses increased by 21.2% to Ps. 54 million during 3Q04 due to
an expansion in the operations for maintenance of refrigeration equipment for
our soft drink operations in addition to higher labor expenses.
Selling expenses increased by 4.0% to Ps. 128 million during 3Q04. As in 2Q04,
this increase was primarily due to increased shipping costs resulting from
increased sales in the domestic market. For the first nine months of 2004,
operating expenses increased by 2.3% to Ps. 503 million compared to Ps. 492
million in the first nine months of 2003.
Operating income (before deduction of management fees) decreased by 8.1% to Ps.
288 million during 3Q04 resulting in an operating margin of 13.7% of total
revenues, a 210 basis point contraction from 3Q03. For the first nine months of
2004, operating income increased 3.1% to Ps. 869 million.
October 27, 2004 10
[LOGO] FEMSA
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CONFERENCE CALL INFORMATION:
Our Third Quarter and First Nine Months 2004 Conference Call will be held on:
Wednesday October 27, 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.:
1-800-818-5264, International: 913-981-4910. 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 November 2, 2004. To listen to the replay please dial:
Domestic U.S.: 1-888-203-1112; International: 719-457-0820, Passcode: 916596.
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Set forth in this press release is certain unaudited financial information for
FEMSA for the third quarter and first nine months of 2004, compared to the third
quarter and first nine months of 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 September 30, 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
October 27, 2004 11
--------------------------------------------------------------------------------
F E M S A Consolidated Income Statement
--------------------------------------------------------------------------------
For the third quarter of: For the nine months of:
Expressed in Millions of Pesos ---------------------------------------------- ---------------------------------------------
as of September 30, 2004 2004 % Integ. 2003 % Integ. % Incr. 2004 % Integ. 2003 % Integ. % Incr.
------------------------------------ ---------------------------------------------- ---------------------------------------------
Net sales 23,663 99.8 22,154 99.8 6.8 68,097 99.7 56,046 99.7 21.5
Other operating revenues 39 0.2 41 0.2 (4.9) 185 0.3 177 0.3 4.5
------------------------------------ ---------------------------------------------- ---------------------------------------------
Total revenues 23,702 100.0 22,195 100.0 6.8 68,282 100.0 56,223 100.0 21.4
Cost of sales 12,520 52.8 11,521 51.9 8.7 36,190 53.0 29,187 51.9 24.0
------------------------------------ ---------------------------------------------- ---------------------------------------------
Gross profit 11,182 47.2 10,674 48.1 4.8 32,092 47.0 27,036 48.1 18.7
------------------------------------ ---------------------------------------------- ---------------------------------------------
Administrative expenses 1,608 6.8 1,542 6.9 4.3 4,795 7.0 4,010 7.1 19.6
Selling expenses 5,961 25.1 5,743 25.9 3.8 17,365 25.4 14,250 25.3 21.9
------------------------------------ ---------------------------------------------- ---------------------------------------------
Operating expenses 7,569 31.9 7,285 32.8 3.9 22,160 32.5 18,260 32.5 21.4
------------------------------------ ---------------------------------------------- ---------------------------------------------
Income from operations 3,613 15.2 3,389 15.3 6.6 9,932 14.5 8,776 15.6 13.2
------------------------------------ ---------------------------------------------- ---------------------------------------------
Interest expense (970) (1,078) (10.0) (2,669) (2,057) 29.8
Interest income 254 271 (6.3) 440 620 (29.0)
------------------------------------ ---------------------------------------------- ---------------------------------------------
Interest expense, net (716) (807) (11.3) (2,229) (1,437) 55.1
Foreign exchange (loss) gain 62 (1,164) N.S. (108) (2,151) (95.0)
Gain (loss) on monetary position 588 481 22.2 1,138 517 N.S.
------------------------------------ ---------------------------------------------- ---------------------------------------------
Integral result of financing (66) (1,490) (95.6) (1,199) (3,071) (61.0)
Participation in affiliated companies 47 39 20.5 56 17 N.S.
Other (expenses) income (59) (152) (61.2) (300) (730) (58.9)
------------------------------------ ---------------------------------------------- ---------------------------------------------
Income before taxes 3,535 1,786 97.9 8,489 4,992 70.1
Taxes (1,290) (653) 97.5 (3,242) (2,004) 61.8
------------------------------------ ---------------------------------------------- ---------------------------------------------
Income before extraordinary items 2,245 1,133 98.1 5,247 2,988 75.6
Extraordinary items -- -- 1,195 -- 100.0
------------------------------------ ---------------------------------------------- ---------------------------------------------
Net Income 2,245 1,133 98.1 6,442 2,988 115.6
------------------------------------ ---------------------------------------------- ---------------------------------------------
Net majority income 1,380 903 52.8 3,871 2,137 81.1
Net minority income 865 230 276.1 2,571 851 202.1
------------------------------------ ---------------------------------------------- ---------------------------------------------
EBITDA & CAPEX
------------------------------------ ---------------------------------------------- ---------------------------------------------
Operating Income 3,613 15.2 3,389 15.3 6.6 9,932 14.5 8,776 15.6 13.2
Depreciation 784 3.3 820 3.7 (4.4) 2,354 3.4 2,133 3.8 10.3
Amortization & other 762 3.2 823 3.7 (7.4) 2,311 3.4 1,989 3.5 16.2
------------------------------------ ---------------------------------------------- ---------------------------------------------
EBITDA 5,159 21.8 5,032 22.7 2.5 14,597 21.4 12,898 22.9 13.2
CAPEX 1,742 2,039 (14.6) 4,680 5,221 (10.4)
------------------------------------ ---------------------------------------------- ---------------------------------------------
-----------------------------
FINANCIAL RATIOS (Times) 2004 2003 Var. p.p.
------------------------------------ ----------------------------------------------------------------------------------------------
Liquidity(1) 0.83 1.14 (0.31)
Interest coverage(2) 6.55 8.98 (2.43)
Leverage(3) 1.41 1.41 (0.00)
Capitalization(4) 49.54% 48.95% 0.59
------------------------------------ ----------------------------------------------------------------------------------------------
(1) Total current assets / total current liabilities.
(2) Income from operations + depreciation + amortization & other / interest
expense, net.
(3) total liabilities/ total stockholders' equity.
(4) Bank loans / (Bank loans + total stockholders' equity).
October 27, 2004 12
F E M S A Consolidated Balance Sheet
As of September 30,:
(Expressed in Millions of Pesos as of September 30, 2004)
---------------------------------------------------------
ASSETS 2004 2003 % Incr.
-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 7,683 10,424 (26.3)
Accounts receivable 4,195 5,326 (21.2)
Inventories 7,221 7,014 3.0
Prepaid expenses 1,010 740 36.5
----------------------------------------------------------------------------------------------------------------------------
Total Current Assets 20,109 23,504 (14.4)
Property, plant and equipment, net 43,604 43,553 0.1
Intangible assets(1) 44,378 34,064 30.3
Deferred assets 6,256 5,207 20.1
Other assets 1,636 2,244 (27.1)
----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 115,984 108,572 6.8
----------------------------------------------------------------------------------------------------------------------------
LIABILITIES & STOCKHOLDERS EQUITY
----------------------------------------------------------------------------------------------------------------------------
Bank loans 8,050 2,292 251.2
Current maturities long term debt 3,726 5,847 (36.3)
Interest payable 465 478 (2.7)
Operating liabilities 12,039 11,959 0.7
----------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 24,280 20,576 18.0
Bank loans 35,482 35,019 1.3
Deferred income taxes 3,287 3,521 (6.6)
Other liabilities 4,804 4,448 8.0
----------------------------------------------------------------------------------------------------------------------------
Total Liabilities 67,853 63,564 6.7
Total Stockholders' equity 48,131 45,008 6.9
----------------------------------------------------------------------------------------------------------------------------
LIAB. & STOCKHOLDERS' EQUITY 115,984 108,572 6.8
----------------------------------------------------------------------------------------------------------------------------
September 2004 December 2003
------------------------------------------ ------------------------------------------
NET DEBT Cash Short-term Long-term Net debt Cash Short-term Long-term Net debt
-----------------------------------------------------------------------------------------------------------------------------------
FEMSA Holding 330 6,192 4,352 10,214 595 -- 94 (501)
Coca-Cola FEMSA 3,492 622 24,886 22,016 2,946 1,766 28,246 27,066
FEMSA Cerveza 3,084 173 6,984 4,073 3,533 32 5,821 2,320
FEMSA Comercio 572 194 1,991 1,613 526 58 1,527 1,059
FEMSA Empaques 205 869 995 1,659 463 705 1,526 1,768
-----------------------------------------------------------------------------------------------------------------------------------
Total Consolidated 7,683 8,050 39,208 39,575 8,063 2,561 37,214 31,712
-----------------------------------------------------------------------------------------------------------------------------------
(1) Consist mainly of the intangible assets generated by Panamco acquisition
and by the acquisition of the 30% of FEMSA Cerveza in 2004.
October 27, 2004 13
Coca-Cola FEMSA Results from operations
For the third quarter of: For the nine months of:
Expressed in Millions of ------------------------------------------------ --------------------------------------------------
Pesos as of September 30, 2004 2004 % Integ. 2003 % Integ. % Incr. 2004 % Integ. 2003 % Integ. % Incr.
------------------------------ ------------------------------------------------ --------------------------------------------------
Net sales 11,381.9 99.7 11,357.8 99.8 0.2 33,392.0 99.6 25,326.8 99.4 31.8
Other revenues 28.7 0.3 25.6 0.2 12.0 148.5 0.4 143.4 0.6 3.4
------------------------------ ------------------------------------------------ --------------------------------------------------
Total revenues 11,410.6 100.0 11,383.4 100.0 0.2 33,540.5 100.0 25,470.2 100.0 31.7
Cost of good sold 5,823.1 51.0 5,826.2 51.2 (0.1) 17,199.0 51.3 12,836.8 50.4 34.0
------------------------------ ------------------------------------------------ --------------------------------------------------
Gross margin 5,587.5 49.0 5,557.2 48.8 0.5 16,341.5 48.7 12,633.4 49.6 29.4
------------------------------ ------------------------------------------------ --------------------------------------------------
Administrative expenses 656.0 5.7 658.7 5.8 (0.4) 1,958.4 5.8 1,372.7 5.4 42.6
Sales expenses 2,974.0 26.1 3,102.3 27.3 (4.1) 9,035.0 26.9 6,539.4 25.7 38.2
------------------------------ ------------------------------------------------ --------------------------------------------------
Operating expenses 3,630.0 31.8 3,761.0 33.0 (3.5) 10,993.4 32.8 7,912.1 31.1 38.9
------------------------------ ------------------------------------------------ --------------------------------------------------
Income from operations 1,957.5 17.2 1,796.2 15.8 9.0 5,348.1 15.9 4,721.3 18.5 13.3
Depreciation 288.0 2.5 346.7 3.0 (16.9) 910.9 2.7 738.9 2.9 23.3
Amortization & other 217.9 1.9 333.8 2.9 (34.7) 776.9 2.3 660.0 2.6 17.7
------------------------------ ------------------------------------------------ --------------------------------------------------
EBITDA 2,463.4 21.6 2,476.7 21.8 (0.5) 7,035.9 21.0 6,120.2 24.0 15.0
Capital Expenditures 498.6 900.6 (44.6) 1,219.8 1,808.9 (32.6)
------------------------------ ------------------------------------------------ --------------------------------------------------
Sales Volumes (1)
(Millions of Unit Cases)
------------------------------ ------------------------------------------------ --------------------------------------------------
Mexico 256.3 54.6 256.2 56.6 0.0 741.6 158.1 757.8 167.3 (2.1)
Central America 27.5 5.9 26.9 5.9 2.3 80.8 17.2 77.9 17.2 3.7
Colombia 40.5 8.6 41.6 9.2 (2.8) 122.0 26.0 126.7 28.0 (3.7)
Venezuela 45.2 9.6 39.7 8.8 13.9 126.7 27.0 105.7 23.3 19.8
Brazil 65.5 14.0 60.0 13.2 9.2 190.7 40.7 187.8 41.5 1.6
Argentina 34.0 7.2 28.6 6.3 18.6 102.5 21.9 87.3 19.3 17.3
------------------------------ ------------------------------------------------ --------------------------------------------------
Total KOF 469.0 99.9 453.0 100.0 3.5 1,364.3 290.9 1,343.3 296.6 1.6
============================== ================================================ ==================================================
(1) For comparison purposes the 2003 sales volumes of the acquired Panamco
territories, were included.
October 27, 2004 14
FEMSA Cerveza Results from operations
For the third quarter of:
----------------------------------------------------------------------------
Expressed in Millions of 2003 "SIX" 2003
Pesos as of September 30, 2004 2004 % Integ. Reported Stores Comparable % Integ. % Incr.
--------------------------------------------- ----------------------------------------------------------------------------
Net sales 5,892.9 99.1 5,876.1 207.1 5,669.0 99.2 3.9
Other revenues 54.5 0.9 46.6 46.6 0.8
--------------------------------------------- ----------------------------------------------------------------------------
Total revenues 5,947.4 100.0 5,922.7 207.1 5,715.6 100.0 4.1
Cost of good sold 2,517.1 42.3 2,505.6 159.7 2,345.9 41.0 7.3
--------------------------------------------- ----------------------------------------------------------------------------
Gross margin 3,430.3 57.7 3,417.1 47.4 3,369.7 59.0 1.8
--------------------------------------------- ----------------------------------------------------------------------------
Administrative expenses 623.2 10.5 595.9 2.4 593.5 10.4 5.0
Sales expenses 1,572.0 26.4 1,636.1 40.9 1,595.2 27.9 (1.5)
--------------------------------------------- ----------------------------------------------------------------------------
Operating expenses 2,195.2 36.9 2,232.0 43.3 2,188.7 38.3 0.3
--------------------------------------------- ----------------------------------------------------------------------------
Income from operations
before management fee 1,235.1 20.8 1,185.1 4.1 1,181.0 20.7 4.6
Management fee 93.7 1.6 108.3 108.3 1.9 (13.5)
--------------------------------------------- ----------------------------------------------------------------------------
Income from operations 1,141.4 19.2 1,076.8 4.1 1,072.7 18.8 6.4
--------------------------------------------- ----------------------------------------------------------------------------
Depreciation 299.6 5.0 302.1 302.1 5.3 (0.8)
Amortization & other 442.7 7.4 453.3 453.3 7.9 (2.3)
--------------------------------------------- ----------------------------------------------------------------------------
EBITDA 1,883.7 31.7 1,832.2 4.1 1,828.1 32.0 3.0
Particip. in affiliated companies 46.6 38.1 38.1 22.3
Capital Expenditures 738.5 754.3 754.3 (2.1)
--------------------------------------------- ----------------------------------------------------------------------------
Sales integration
--------------------------------------------- ----------------------------------------------------------------------------
Domestic reven. Millions of Ps 5,409.3 91.8 5,412.4 5,205.4 91.8 3.9
Exports reven.: Millions of Ps 483.6 8.2 463.6 463.6 8.2 4.3
US Millions 42.4 40.2 40.2 5.5
--------------------------------------------- ----------------------------------------------------------------------------
Sales volumes
(Thousand hectoliters)
--------------------------------------------- ----------------------------------------------------------------------------
Domestic 6,048.0 90.9 5,801.0 5,801.0 90.6 4.3
Exports 608.8 9.1 600.3 600.3 9.4 1.4
--------------------------------------------- ----------------------------------------------------------------------------
Total 6,656.8 100.0 6,401.3 6,401.3 100.0 4.0
--------------------------------------------- ----------------------------------------------------------------------------
Revenue per hectoliter
--------------------------------------------- ----------------------------------------------------------------------------
Domestic 894.4 933.0 897.3 (0.3)
Exports 794.3 772.4 772.4 2.8
--------------------------------------------- ----------------------------------------------------------------------------
Total 885.2 918.0 885.6 (0.0)
--------------------------------------------- ----------------------------------------------------------------------------
Total presentation mix
(%)
--------------------------------------------- ----------------------------------------------------------------------------
Returnable 4,304.8 64.7 4,347.2 4,347.2 67.9 (1.0)
Non Returnable 647.5 9.7 561.1 561.1 8.8 15.4
Cans 1,704.5 25.6 1,493.0 1,493.0 23.3 14.2
--------------------------------------------- ----------------------------------------------------------------------------
Total 6,656.8 100.0 6,401.3 6,401.3 100.0 4.0
--------------------------------------------- ----------------------------------------------------------------------------
For the nine months of:
-----------------------------------------------------------------------------
Expressed in Millions of 2003 "SIX" 2003
Pesos as of September 30, 2004 2004 % Integ. Reported Stores Comparable % Integ. % Incr.
--------------------------------------------- -----------------------------------------------------------------------------
Net sales 17,021.1 99.2 16,821.8 598.6 16,223.2 99.3 4.9
Other revenues 17.0 139.7 0.8 115.1 115.1 0.7 21.4
--------------------------------------------- -----------------------------------------------------------------------------
Total revenues 17,160.8 100.0 16,936.9 598.6 16,338.3 100.0 5.0
Cost of good sold 7,212.0 42.0 7,274.5 465.1 6,809.4 41.7 5.9
--------------------------------------------- -----------------------------------------------------------------------------
Gross margin 9,948.8 58.0 9,662.4 133.5 9,528.9 58.3 4.4
--------------------------------------------- -----------------------------------------------------------------------------
Administrative expenses 1,891.5 11.0 1,795.2 7.2 1,788.0 10.9 5.8
Sales expenses 4,683.5 27.3 4,819.5 116.8 4,702.7 28.8 (0.4)
--------------------------------------------- -----------------------------------------------------------------------------
Operating expenses 6,575.0 38.3 6,614.7 124.0 6,490.7 39.7 1.3
--------------------------------------------- -----------------------------------------------------------------------------
Income from operations
before management fee 3,373.8 19.7 3,047.7 9.5 3,038.2 18.6 11.0
Management fee 304.4 1.8 326.5 326.5 2.0 (6.8)
--------------------------------------------- -----------------------------------------------------------------------------
Income from operations 3,069.4 17.9 2,721.2 9.5 2,711.7 16.6 13.2
--------------------------------------------- -----------------------------------------------------------------------------
Depreciation 890.8 5.2 901.0 901.0 5.5 (1.1)
Amortization & other 1,383.4 8.1 1,287.0 1,287.0 7.9 7.5
--------------------------------------------- -----------------------------------------------------------------------------
EBITDA 5,343.6 31.1 4,909.2 9.5 4,899.7 30.0 9.1
Particip. in affiliated companies 55.9 16.6 16.6 N.S.
Capital Expenditures 2,116.8 2,268.4 2,268.4 (6.7)
--------------------------------------------- -----------------------------------------------------------------------------
Sales integration
--------------------------------------------- -----------------------------------------------------------------------------
Domestic reven. Millions of Ps 15,602.6 91.7 15,620.7 15,022.1 92.6 3.9
Exports reven.: Millions of Ps 1,418.5 8.3 1,201.1 1,201.1 7.4 18.1
US Millions 124.2 105.4 105.4 17.8
--------------------------------------------- -----------------------------------------------------------------------------
Sales volumes
(Thousand hectoliters)
--------------------------------------------- -----------------------------------------------------------------------------
Domestic 17,443.0 90.7 16,762.0 16,762.0 91.5 4.1
Exports 1,788.0 9.3 1,560.1 1,560.1 8.5 14.6
--------------------------------------------- -----------------------------------------------------------------------------
Total 19,231.0 100.0 18,322.1 18,322.1 100.0 5.0
--------------------------------------------- -----------------------------------------------------------------------------
Revenue per hectoliter
--------------------------------------------- -----------------------------------------------------------------------------
Domestic 894.5 931.9 896.2 (0.2)
Exports 793.4 769.9 769.9 3.1
--------------------------------------------- -----------------------------------------------------------------------------
Total 885.1 918.1 885.4 (0.0)
--------------------------------------------- -----------------------------------------------------------------------------
Total presentation mix
(%)
--------------------------------------------- -----------------------------------------------------------------------------
Returnable 12,588.2 65.5 12,530.7 12,530.7 68.4 0.5
Non Returnable 1,874.2 9.7 1,570.1 1,570.1 8.6 19.4
Cans 4,768.6 24.8 4,221.3 4,221.3 23.0 13.0
--------------------------------------------- -----------------------------------------------------------------------------
Total 19,231.0 100.0 18,322.1 18,322.1 100.0 5.0
--------------------------------------------- -----------------------------------------------------------------------------
October 27, 2004 15
FEMSA Comercio Results from operations
For the third quarter of:
---------------------------------------------------------------------------------
Expressed in Millions of 2003 "SIX" 2003
Pesos as of September 30, 2004 2004 % Integ. Reported Stores Comparable % Integ. % Incr.
--------------------------------------------- ---------------------------------------------------------------------------------
Net sales 5,974.3 100.0 4,440.0 207.1 4,647.1 100.0 28.6
Other revenues
--------------------------------------------- ---------------------------------------------------------------------------------
Total revenues 5,974.3 100.0 4,440.0 207.1 4,647.1 100.0 28.6
Cost of good sold 4,388.2 73.5 3,258.8 159.7 3,418.5 73.6 28.4
--------------------------------------------- ---------------------------------------------------------------------------------
Gross margin 1,586.1 26.5 1,181.2 47.4 1,228.6 26.4 29.1
--------------------------------------------- ---------------------------------------------------------------------------------
Administrative expenses 110.1 1.8 65.9 2.4 68.3 1.5 61.2
Sales expenses 1,229.6 20.6 890.0 40.9 930.9 20.0 32.1
--------------------------------------------- ---------------------------------------------------------------------------------
Operating expenses 1,339.7 22.4 955.9 43.3 999.2 21.5 34.1
--------------------------------------------- ---------------------------------------------------------------------------------
Income from operations
before management fee 246.4 4.1 225.3 4.1 229.4 4.9 7.4
Management fee 29.4 0.5 25.2 25.2 0.5 16.6
--------------------------------------------- ---------------------------------------------------------------------------------
Income from operations 217.0 3.6 200.1 4.1 204.2 4.4 6.3
--------------------------------------------- ---------------------------------------------------------------------------------
Depreciation 31.3 0.5 34.0 34.0 0.7 (8.2)
Amortization & other 82.9 1.4 34.8 34.8 0.7 138.4
--------------------------------------------- ---------------------------------------------------------------------------------
EBITDA 331.2 5.5 268.9 4.1 273.0 5.9 21.3
Capital Expenditures 478.1 319.7 319.7 49.5
--------------------------------------------- ---------------------------------------------------------------------------------
Information of Convenience Stores
--------------------------------------------- ---------------------------------------------------------------------------------
Total stores
New convenience stores 173 142 21.8
Same stores data: (1)
Sales (Thousands Pesos) 606.5 550.2 10.2
Traffic 23.8 22.8 4.2
Ticket 25.5 24.1 5.8
--------------------------------------------- ---------------------------------------------------------------------------------
For the nine months of:
---------------------------------------------------------------------------------
Expressed in Millions of 2003 "SIX" 2003
Pesos as of September 30, 2004 2004 % Integ. Reported Stores Comparable % Integ. % Incr.
--------------------------------------------- ---------------------------------------------------------------------------------
Net sales 16,276.8 100.0 12,497.9 598.6 13,096.5 100.0 24.3
Other revenues
--------------------------------------------- ---------------------------------------------------------------------------------
Total revenues 16,276.8 100.0 12,497.9 598.6 13,096.5 100.0 24.3
Cost of good sold 12,005.0 73.8 9,212.3 465.1 9,677.4 73.9 24.1
--------------------------------------------- ---------------------------------------------------------------------------------
Gross margin 4,271.8 26.2 3,285.6 133.5 3,419.1 26.1 24.9
--------------------------------------------- ---------------------------------------------------------------------------------
Administrative expenses 317.4 2.0 201.8 7.2 209.0 1.6 51.8
Sales expenses 3,300.5 20.3 2,516.7 116.8 2,633.5 20.1 25.3
--------------------------------------------- ---------------------------------------------------------------------------------
Operating expenses 3,617.9 22.2 2,718.5 124.0 2,842.5 21.7 27.3
--------------------------------------------- ---------------------------------------------------------------------------------
Income from operations
before management fee 653.9 4.0 567.1 9.5 576.6 4.4 13.4
Management fee 84.6 0.5 61.7 61.7 0.5 37.2
--------------------------------------------- ---------------------------------------------------------------------------------
Income from operations 569.3 3.5 505.4 9.5 514.9 3.9 10.6
--------------------------------------------- ---------------------------------------------------------------------------------
Depreciation 147.5 0.9 98.5 98.5 0.8 49.7
Amortization & other 166.5 1.0 100.5 100.5 0.8 65.8
--------------------------------------------- ---------------------------------------------------------------------------------
EBITDA 883.4 5.4 704.4 9.5 713.9 5.5 23.7
Capital Expenditures 1,226.3 803.9 803.9 52.5
--------------------------------------------- ---------------------------------------------------------------------------------
Information of Convenience Stores
--------------------------------------------- ---------------------------------------------------------------------------------
Total stores 3,259 2,541 28.3
New convenience stores 461 325 41.8
Same stores data: (1)
Sales (Thousands Pesos) 579.6 533.7 8.6
Traffic 22.7 21.9 3.7
Ticket 25.5 24.4 4.7
--------------------------------------------- ---------------------------------------------------------------------------------
(1) Monthly average information per store, considering same stores with 13
months of operations.
October 27, 2004 16
FEMSA Empaques Results from operations
For the third quarter of: For the nine months of:
Expressed in Millions of ----------------------------------------------- --------------------------------------------------
Pesos as of September 30, 2004 2004 % Integ. 2003 % Integ. % Incr. 2004 % Integ. 2003 % Integ. % Incr.
------------------------------ ----------------------------------------------- --------------------------------------------------
Net sales 2,085.8 99.3 1,971.3 99.7 5.8 6,025.0 99.5 5,579.3 99.7 8.0
Other revenues 15.3 0.7 6.8 0.3 125.8 27.9 0.5 18.6 0.3 49.8
------------------------------ ----------------------------------------------- --------------------------------------------------
Total revenues 2,101.1 100.0 1,978.1 100.0 6.2 6,052.9 100.0 5,597.9 100.0 8.1
Cost of good sold 1,631.6 77.7 1,497.5 75.7 9.0 4,681.3 77.3 4,263.6 76.2 9.8
------------------------------ ----------------------------------------------- --------------------------------------------------
Gross margin 469.5 22.3 480.6 24.3 (2.3) 1,371.6 22.7 1,334.3 23.8 2.8
------------------------------ ----------------------------------------------- --------------------------------------------------
Administrative expenses 53.9 2.6 44.4 2.2 21.2 147.5 2.4 140.2 2.5 5.2
Sales expenses 127.8 6.1 123.0 6.2 4.0 355.5 5.9 351.3 6.3 1.2
------------------------------ ----------------------------------------------- --------------------------------------------------
Operating expenses 181.7 8.6 167.4 8.5 8.5 503.0 8.3 491.5 8.8 2.3
------------------------------ ----------------------------------------------- --------------------------------------------------
Income from operations
before management fee 287.8 13.7 313.1 15.8 (8.1) 868.6 14.3 842.8 15.1 3.1
Management fee 30.9 1.5 29.2 1.5 5.9 90.1 1.5 84.9 1.5 6.1
------------------------------ ----------------------------------------------- --------------------------------------------------
Income from operations 256.9 12.2 284.0 14.4 (9.5) 778.5 12.9 757.9 13.5 2.7
------------------------------ ----------------------------------------------- --------------------------------------------------
Depreciation 78.8 3.8 77.9 3.9 1.2 228.5 3.8 211.3 3.8 8.2
Amortization & other 27.9 1.3 26.6 1.3 5.1 68.8 1.1 60.9 1.1 13.0
------------------------------ ----------------------------------------------- --------------------------------------------------
EBITDA 363.6 17.3 388.5 19.6 (6.4) 1,075.8 17.8 1,030.1 18.4 4.4
Capital Expenditures 14.2 47.2 (69.9) 93.6 309.8 (69.8)
------------------------------ ----------------------------------------------- --------------------------------------------------
Total sales volume
(Millions of pieces)
------------------------------ ----------------------------------------------- --------------------------------------------------
Cans 911.7 819.3 11.3 2,576.3 2,434.2 5.8
Crown Caps 4,340.1 3,649.4 18.9 12,505.6 10,603.6 17.9
Glass Bottles 300.4 257.1 16.8 864.2 745.5 15.9
------------------------------ ----------------------------------------------- --------------------------------------------------
Export volumes: Cans 81.9 162.4 (49.6) 279.4 456.4 (38.8)
Crown Caps 2,602.4 2,173.8 19.7 7,923.1 6,017.3 31.7
------------------------------ ----------------------------------------------- --------------------------------------------------
Exports reven.: Millions of Ps 221.1 245.7 (10.0) 652.8 689.6 (5.3)
US Millions 19.3 21.5 (10.2) 56.8 60.8 (6.6)
------------------------------ ----------------------------------------------- --------------------------------------------------
% of sales revenue by client category: Var. p.p. Var. p.p.
------------------------------ ----------------------------------------------- --------------------------------------------------
Intercompany sales 54.1 60.5 (6.4) 53.4 59.3 (5.9)
------------------------------ ----------------------------------------------- --------------------------------------------------
FEMSA Cerveza 46.7 41.8 4.9 43.0 40.0 3.0
Coca-Cola FEMSA 7.4 18.7 (11.3) 10.4 19.3 (8.9)
------------------------------ ----------------------------------------------- --------------------------------------------------
Third-party sales 45.9 39.5 6.4 46.6 40.7 5.9
------------------------------ ----------------------------------------------- --------------------------------------------------
Domestic 34.5 28.0 6.5 35.4 28.8 6.6
Export 11.4 11.5 (0.1) 11.2 11.9 (0.7)
------------------------------ ----------------------------------------------- --------------------------------------------------
Total 100.0 100.0 -- 100.0 100.0 --
------------------------------ ----------------------------------------------- --------------------------------------------------
October 27, 2004 17
Other Financial Information
F E M S A as of September 30, 2004:
MACROECONOMIC INFORMATION
Inflation Exchange Rate
---------------------- --------------------------
Sep03-Sep04 III Qtr. Per USD Per Mx. Peso
--------------------------------------------------------------------------------
Mexico 5.06% 1.72% 11.3759 1.0000
Colombia 5.98% 0.62% 2,595.1700 0.0044
Venezuela 20.83% 3.27% 1,920.0000 0.0059
Brazil 5.96% 1.47% 2.8586 3.9795
Argentina 5.73% 1.31% 2.9800 3.8174
--------------------------------------------------------------------------------
October 27, 2004 18
Stock Listing Information
Mexican Stock Exchange
Ticker: KOFL
NYSE (ADR)
Ticker: KOF
Ratio of KOF L to KOF = 10:1
[SEAL]
KOF L
KOF
Listed
NYSE
For Further Information:
Investor Relations
Alfredo Fernandez
alfredo.fernandez@kof.com.mx
(5255) 5081-5120 / 5121
Julieta Naranjo
julieta.naranjo@kof.com.mx
(5255) 5081-5148
Website:
www.cocacola-femsa.com.mx
[LOGO] COCA-COLA
FEMSA
2004
THIRD QUARTER RESULTS
--------------------------------------------------------------------------------
Third quarter Third quarter
------------------ --------------------
2004 2003 ^% 2004 2003
------------------------------------------------------------------------------------------------------------------------------------
Total Revenues 11,411 11,358 0.5% % of Tot. Rev.
------------------------------------------------------------------------------------------------------------------------------------
Gross Profit 5,588 5,557 0.5% 49.0% 48.9%
------------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,958 1,796 9.0% 17.2% 15.8%
------------------------------------------------------------------------------------------------------------------------------------
Majority net income 1,257 546 130.4% 11.0% 4.8%
------------------------------------------------------------------------------------------------------------------------------------
EBITDA(1) 2,463 2,477 -0.5% 21.6% 21.8%
------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Net Debt (2) (3) 22,045 27,158
----------------------------------------------------------------------------------------------
Quarterly EBITDA (1)/Quarterly Interest Expense 4.15
----------------------------------------------------------------------------------------------
Quarterly Earnings per Share 0.68 0.30
----------------------------------------------------------------------------------------------
Average Shares Outstanding 1,846.4 1,846.4
----------------------------------------------------------------------------------------------
Expressed in million of Mexican pesos with purchasing power as of September 30,
2004, except for per share amount.
(1) EBITDA = Operating income + Depreciation + Amortization & Others. See
reconciliation table on page 11.
(2) Figures for 2003 are as of December 31, 2003.
(3) Net Debt = Total Debt - Cash
o Total revenues for the third quarter reached Ps.11,410.6 million
o Consolidated operating income increased 9.0% totaling Ps.1,957.6 million,
and operating margin reached 17.2%, a margin expansion of 140 basis
points.
o Consolidated net income increased by 130.4% to Ps.1,257.0 million,
resulting in earnings per share of Ps.0.681
o Total net debt at the end of the quarter was approximately U.S.$1,937.9
million.
Mexico City (October 27, 2004), Coca-Cola FEMSA, S.A. de C.V. ("Coca-Cola FEMSA"
or the "Company"), the largest Coca-Cola bottler in Latin America and the
second-largest Coca-Cola bottler in the world, in terms of sales volume,
announces results for the third quarter and nine months of 2004.
"We have successfully completed the integration of our new operations and we are
pleased with the results we have achieved thus far. The evident turnaround in
profitability outside of Mexico underscores the efficacy of our shared business
practices and strategies and, importantly, our understanding of our new market
territories' cultural differences and consumption habits. Additionally, we are
improving gradually our level of profitability in Mexico, despite raw-material
cost pressure and the more complex competitive environment" said Carlos Salazar,
Chief Executive Officer of the Company.
--------------------------------------------------------------------------------
October 27, 2004 19
[LOGO] COCA-COLA
FEMSA
Consolidated Results and Consolidated Balance Sheet
--------------------------------------------------------------------------------
CONSOLIDATED RESULTS
Our consolidated revenues reached Ps.11,410.6 million for the third quarter of
2004, an increase of 0.2% as compared to the same period of 2003. Our average
price per unit case was Ps.24.27 (U.S.$2.13)2 and our consolidated operating
income increased 9.0% to Ps.1,957.6 million, resulting in a margin expansion of
140 basis points from 15.8% to 17.2% over the prior quarter.
During the third quarter of 2004, our integral cost of financing shifted from a
loss of Ps.942.2 million to a gain of Ps.128.7 million in the third quarter of
2003. This improvement mainly reflected a foreign exchange gain generated by the
appreciation of the Mexican peso versus the U.S. dollar applied to our U.S.
dollar-denominated debt and lower net interest expenses driven by a reduction in
average debt balances.
During the third quarter of 2004, income tax, tax on assets, and employee profit
sharing, as a percentage of income before taxes, was 40.6%. During the same
period of 2003 this rate was 33.2%, reflecting the deduction for tax purposes of
fees associated with the Panamco acquisition, which were capitalized as part of
the acquisition cost for financial purposes.
Our consolidated majority net income increased 130.4% to Ps.1,257.0 million in
the third quarter of 2004 as compared to the same period in 2003, resulting in
earnings per share ("EPS") of Ps.0.681 (U.S.$0.598 per ADS) computed on the
basis of 1,846.4 million shares outstanding (each ADS represents 10 local
shares).
BALANCE SHEET
As of September 30, 2004, Coca-Cola FEMSA had a cash balance of Ps.3,492 million
(U.S.$307.0 million), total short-term debt of Ps.3,380 million (U.S.$297.1
million), and long-term debt of Ps.22,157 million (U.S.$1,947.7 million).
During the third quarter of 2004, we reduced the Company's total debt by
approximately U.S.$70 million. We completed the refinancing of the remaining
principal amount of our 5yr USD syndicated loan (U.S.$40 million) from last
year's acquisition financing, with a new 6 yr Ps.550 million bilateral loan. We
also paid down the U.S.$100 million Private Placement Notes due 2004 issued in
1994. During the third quarter of 2004, the peso appreciated from Ps.11.5123 to
Ps.11.3759, causing our total debt to increase in dollar terms by approximately
U.S.$18.8 million.
The following charts set forth the Company's debt profile by currency and
interest-rate type and the debt amortization schedule as of September 30, 2004:
--------------------------------------------------------------------------------
% Interest Rate Average
Currency % Total Debt Floating Rate(2)
--------------------------------------------------------------------------------
U.S. dollars 32% 31% 6.23%
Mexican pesos 65% 21% 9.11%
Colombian pesos 3% 100% 10.16%
--------------------------------------------------------------------------------
(2) Annualized average interest rate per currency for the third quarter of
2004
Debt Amortization Schedule
amounts in millions (local currency)(3)
--------------------------------------------------------------------------------
U.S. dollars Mexican pesos Colombian pesos
--------------------------------------------------------------------------------
2004 $ 54.8
2005 0.7 Ps. 2,750.0 Col. 65,750
2006 200.7 1,314.7 45,000
2007 0.7 2,000.0 34,250
2008 0.2 3,750.0
2009 and thereafter 455.0 6,700.0
--------------------------------------------------------------------------------
(3) Debt amortization valued at face value as of September 30, 2004
----------
(2) Assumes a foreign exchange rate of Ps.11.3759 per U.S. dollar
October 27, 2004 20
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FEMSA
Consolidated statement of changes in financial position and operating results by
territory
--------------------------------------------------------------------------------
Consolidated Statement of Changes in Financial Position
Expressed in million of Mexican pesos or U.S. dollars as of September 30, 2004
--------------------------------------------------------------------------------
Jan - Sep 2004
Ps. USD(1)
----------------------------------------------------- ------------------------
Net Income before extraordinary items 2,711 238
Non cash charges to operating income 1,688 148
Other non cash charges to net income (254) (22)
----------------------------------------------------- ------------------------
4,145 216
------------------------
Change in Working capital 507 45
----------------------------------------------------- ------------------------
NRGOA(2) before extraordinary items 4,652 261
----------------------------------------------------- ------------------------
Extraordinary items 1,194 105
----------------------------------------------------- ------------------------
NRGOA(2) 5,846 366
----------------------------------------------------- ------------------------
Capital expenditures (1,220) (107)
Investments in shares and other assets (190) (17)
Dividend payments (530) (47)
Financial Transactions (3,854) (339)
Others 495 43
----------------------------------------------------- ------------------------
Increase in cash and cash equivalents 546 (84)
----------------------------------------------------- ------------------------
Cash and cash equivalents at begining of period 2,946 259
Cash and cash equivalents at end of period 3,492 307
--------------------------------------------------------------------------------
(1) Expressed in US$ millions assuming a foreign exchange rate of Ps. 11.3759
per US Dollar
(2) Net Resources Generated by Operating Activities
OPERATING RESULTS BY TERRITORY
During the second quarter of 2003, we began consolidating the results of our new
territories 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
prepared and 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's results have not been included in our financial statements for periods
prior to May 2003.
Financial information for the third quarter of 2004 is comparable with the third
quarter of 2003, however for the nine-month period is not comparable. On an
annual basis the information will not be comparable until the end of 2005.
As we mentioned in our fourth-quarter 2003 press release, several changes in the
accounting policies were booked during that quarter which impacted our results
for 2003. These changes were related to (i) an excise tax reimbursement in
Mexico that would have impacted positively the third quarter of 2003 in the
amount of Ps.47 million, ( ii) an increase in the useful life of the coolers in
our original territories in Mexico from three to five years that would have
decreased our depreciation expense by Ps.32 million in the third quarter of
2003, and ( iii) the change in accounting policies related to the treatment of
bottles and cases in the countries comprising our Latincentro division that
would have reduced the operating expenses by Ps.60 million, decreasing the
non-cash items in the same amount in the third quarter of 2003.
As part of an accounting standardization process implemented in Coca-Cola FEMSA
territories during 2004, certain expenses that were classified as administrative
expenses during 2003 are now classified as selling expenses during 2004. For
comparison purposes we reclassified 2003 figures without impacting total
operating expenses in 2003. The effect of these reclassifications were Ps.110.1
million and Ps.342.5 million for the third quarter of 2003 and the nine months
ended in September 30, 2003, respectively.
For nine-month period volume comparison purposes, we have included the sales
volume figures recorded by Panamco for 2003 through the end of April 2003.
October 27, 2004 21
[LOGO] COCA-COLA
FEMSA
Third quarter and First nine months 2004 summary
--------------------------------------------------------------------------------
THIRD QUARTER 2004 SUMMARY:
--------------------------------------------------------------------------------------------------
Volume Operating Income
(MUC) % Total (million) % Total % Operating Margin
--------------------------------------------------------------------------------------------------
Mexico 256.3 54.6% Ps. 1,447.7 74.0% 21.6%
Central America 27.4 5.9% 101.1 5.2% 12.0%
Colombia 40.5 8.6% 145.9 7.5% 15.2%
Venezuela 45.2 9.6% 53.8 2.7% 4.5%
Brazil 65.6 14.0% 112.5 5.7% 9.7%
Argentina 34.0 7.3% 96.7 4.9% 16.3%
--------------------------------------------------------------------------------------------------
Total 468.9 100.0% Ps.1,957.6 100.0% 17.2%
--------------------------------------------------------------------------------------------------
FIRST NINE MONTHS 2004 SUMMARY:
--------------------------------------------------------------------------------------------------
Volume Operating Income
(MUC) % Total (million) % Total % Operating Margin
--------------------------------------------------------------------------------------------------
Mexico 741.6 54.4% Ps.4,041.2 75.5% 20.5%
Central America 80.8 5.9% 291.7 5.5% 11.4%
Colombia 122.0 8.9% 274.6 5.1% 9.9%
Venezuela 126.7 9.3% 206.1 3.9% 6.1%
Brazil 190.7 14.0% 261.0 4.9% 7.7%
Argentina 102.5 7.5% 273.7 5.1% 15.5%
--------------------------------------------------------------------------------------------------
Total 1,364.3 100.0% Ps.5,348.0 100.0% 15.9%
--------------------------------------------------------------------------------------------------
October 27, 2004 22
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FEMSA
Mexican and Central American operating results
--------------------------------------------------------------------------------
MEXICAN OPERATING RESULTS
Revenues
Revenues in our Mexican territories were Ps.6,707.2 million for the third
quarter of 2004, 6.0% lower as compared to the third quarter of 2003, mainly
driven by a 5.6% decline in the average price per unit case during the third
quarter of 2004. Higher rates of sales volume growth in our territories outside
the Valley of Mexico, which have a lower price per unit case, combined with
lower average price per unit case, were the main reason for the price decrease.
Excluding Ciel water volumes in 5.0, 19.0, and 20.0-liter packaging
presentations, our average price per unit case was Ps.29.8 (U.S.$2.62).
Total sales volume remained almost flat in the third quarter of 2004 as compared
to the same period of 2003, reaching 256.3 million unit cases ("MUC").
Carbonated Soft Drink ("CSD") sales volume increased 1.6% to 205.9 MUC,
offsetting the 6.4% reduction in the jug water sales volume. CSD category growth
mainly resulted from the solid performance of our flavor brands, which accounted
for approximately two thirds of incremental volumes, while brand Coca-Cola
accounted for the balance.
Income from Operations
During the quarter we experienced higher sweetener and polyethylene terephtalate
("PET") costs, which we partially offset with cost savings from our light-weight
bottle initiatives, our increased use of standard sugar as compared to the third
quarter of the previous year, and the synergies we captured from the
consolidation of our new Mexican territories resulting on a 30 basis points
decline in the gross margin from 53.0% in the third quarter of 2003 to 52.7% in
the same period of 2004.
Operating expenses declined 4.4% to Ps.2,088.3 million, representing 31.1% of
total revenues. The decline in operating expenses was mainly driven by
adjustments in the compensation scheme in our pre-sale system, which increased
the fixed component of our sales force wages and headcount optimization since
the third quarter of last year. All of the above reduced our operating profit by
9.3% to Ps.1,447.7 million, resulting in an operating margin of 21.6%.
CENTRAL AMERICAN OPERATING RESULTS (Guatemala, Nicaragua, Costa Rica and Panama)
Revenues
In our Central American territories, total revenues reached Ps.841.8 million for
the third quarter of 2004, an increase of 1.7% as compared to the same period of
2003, mainly driven by volume growth. Our average price per unit case was
Ps.30.78 (U.S.$2.71) declining 0.6% due to a shift in our packaging mix to
larger presentations.
Total sales volume in our Central American territories reached 27.4 MUC, a 2.0%
increase as compared to the same quarter of 2003. This increase was mainly
driven by volume growth in Costa Rica and Nicaragua. Brand Coca-Cola and flavors
each accounted for approximately half of the volume increase.
Income from Operations
For the third quarter of 2004 our gross profit decreased by 7.3% to Ps.382.7
million as compared to the same period of 2003, resulting for 45.5% of gross
margin. During the period, the Company experienced increases in raw material
prices, mainly for sugar and PET, compared with the third quarter of 2003.
Despite the decline in gross profit, we increased our operating income by 49.8%
in the third quarter of 2004 as compared to the same period of 2003, reaching an
operating margin of 12.0%. The margin improvement resulted mainly from a shift
in profitability of our Guatemalan operation and by increasing the fixed
component in the compensation scheme in our pre-sale system in some of our
Central American operations.
October 27, 2004 23
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FEMSA
Colombian and Venezuelan operating results
--------------------------------------------------------------------------------
COLOMBIAN OPERATING RESULTS
Revenues
In Colombia, our total revenues were Ps.960.5 million for the third quarter of
2004, a 1.99% decline from the third quarter of 2003, despite a 2.6% decrease in
sales volume. Our average price per unit case was Ps.23.73 (U.S.$2.09), 0.9%
higher than the third quarter of 2003, as a result of price increases
implemented in May 2004 over a declining and depressed pricing base. Our sales
volume of brand Coca-Cola grew 5.5% to 26.7 MUC in the third quarter of 2004 as
compared to the same period of the previous year, partially offsetting a 18.2%
decline in our CSD flavors.
Income from Operations
During the third quarter of 2004, our gross profit totaled Ps.465.5 million, an
increase of 1.6% compared with the same period of 2003, resulting in a 48.5%
gross margin as compared to 46.8% in the same period of 2003. These results were
mainly due to (i) lower sugar prices, and a shift to standard sugar, which is
less-expensive, (ii) manufacturing savings achieved from the rationalization of
our plants, and (iii) the appreciation of the Colombian Peso against the U.S.
dollar applied to our dollar-denominated costs.
Our operating income was Ps.145.9 million during the third quarter of 2004,
resulting in a 15.2% operating income margin compared to 8.4% in the previous
year. This improvement was mainly driven by headcount optimization and lower
corporate charges driven by centralization of certain administrative practices.
VENEZUELAN OPERATING RESULTS
Revenues
In Venezuela, our total revenues increased by 19.9% in the third quarter of
2004, as compared with the same period of the previous year totaling Ps.1,185.7
million, as a result of the combined effect of an increase of 5.1% in the
average price per unit case and a 13.9% of volume growth. Our average price per
unit case was Ps.26.20 (U.S.$2.30) as a result of price increases implemented at
the end of the first quarter of 2004, which were partially offset by a product
mix shift towards multi-serve presentations of the value protection brand
Grapette. Sales volume increase was mainly driven by the introduction of the new
presentation for the multi-flavor brand Hit and the continuous roll-out of
larger presentations for the value protection brand Grapette which combined
accounted for two thirds of the sales volume growth and the Coca-Cola brand
representing the majority of the balance.
Income from Operations
In the third quarter of 2004, gross profit grew 27.9% year-over-year to Ps.510.9
million for a gross profit margin of 43.1% compared with 40.4% for the same
period of 2003. Higher sales volume and the higher average price per unit case
more than offset an increase in the unitary cost of sales due to a packaging mix
shift to non-returnable presentations, which have higher packaging costs.
Selling and administrative expenses increased 60 basis points as percentage of
total revenues due to (i) higher freight costs reflecting price increases above
inflation, (ii) a reclassification of promotional expenses that was previously
recorded in net revenues, and (iii) higher administrative expenses driven by
additional senior and operating headcount intended to strength our management
team in Venezuela. Our operating income was Ps.53.8 million, a 200 basis points
improvement as a percentage of total revenues, over the same period of last year
resulting in a 4.5% operating income margin.
October 27, 2004 24
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FEMSA
Brazilian and Argentine operating results
--------------------------------------------------------------------------------
BRAZILIAN OPERATING RESULTS
Revenues
In Brazil, our total revenues reached Ps.1,161.4 million for the third quarter
of 2004, an improvement of 12.9% as compared with the same period of the
previous year. Our average price per unit case was Ps.17.65 (U.S.$1.55), a 3.4%
increase over the third quarter of 2003, as a result of (i) a 2.5% weighted
average price increase implemented in May 2004, (ii) our strategic shift in the
product and channel mix towards the core brands and small retailers,
respectively, and (iii) the implementation of our revenue management strategies.
During the third quarter of 2004, all of our beverage categories recorded
increased volumes. CSD's sales volume in our Brazilian territories increased by
12.3% as compared with the same period of 2003, mainly driven by a 14.9% sales
volume growth in brand Coca-Cola, which accounted for more than 70% of the sales
volume increase in the period.
Income from Operations
During the third quarter of 2004, our gross profit totaled Ps.463.7 million, a
26.0% increase as compared with the same period of the previous year. Gross
margin rose from 35.8% in the third quarter of 2003 to 39.9% in the same period
of 2004, reflecting the optimized use of raw materials and higher efficiency
levels.
In absolute terms, our operating expenses increased slightly as compared to the
third quarter of 2003, however, they decreased as a percentage of sales as a
result of higher operating leverage driven by an increase in sales volume. Our
third-quarter operating income was Ps.112.5 million, resulting in a margin
expansion of 760 basis points from 2.1% in the third quarter of 2003 to 9.7% in
the same period of 2004.
ARGENTINE OPERATING RESULTS
Revenues
In Argentina, our total revenues reached Ps.592.5 million, a 21.1% increase over
the third quarter of 2003, due to the combined effect of an 18.9% sales volume
growth and a 2.4% average price per unit growth during the same period. The
average price growth was driven by price increases implemented at the end of
July 2004.
During the quarter, the company experienced increased volumes in all of its
beverage categories. Our premium and core brands represented more than 60% of
the incremental sales volume during the quarter and the value protection brand
Tai comprised the majority of the remaining balance.
Income from Operations
Our gross profit as a percentage of total revenues increased 400 basis points,
from 37.3% in the third quarter of 2003 to 41.3% in the third quarter of 2004
due to the continued packaging mix trend to returnable presentations, which
accounted for 27% of our sales volume in the third quarter of 2004, as compared
to 25% in the same period of 2003.
In Argentina, our operating expenses as a percentage of total revenues decreased
260 basis points, from 27.6% in the third quarter of 2003 to 25.0% in the third
quarter of 2004. This improvement resulted from higher fixed-cost absorption due
to higher revenues. During the third quarter of 2004, operating income in our
Argentine territories was Ps.96.7 million, and our operating income margin
reached 16.3%, an increase of 660 basis points compared with the third quarter
of 2003.
October 27, 2004 25
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FEMSA
Summary of nine-month and recent developments
--------------------------------------------------------------------------------
SUMMARY OF NINE-MONTH RESULTS
Financial information for the first nine months of 2004 is not comparable with
the same period of 2003, however for volume comparison purposes, we have
included the sales volume figures recorded by Panamco for 2003 through the end
of April 2003.
For the nine months ended September 30, 2004, our consolidated sales volume
reached 1,364.3 MUC, an increase of 1.69% driven by volume growth in almost all
of our territories during the first nine months of the year.
During the first nine months of 2004, our total revenues reached Ps.33,540.5
million, which resulted in a consolidated average unit price per case of
Ps.24.48 (U.S.$2.15). Our gross margin as a percentage of total revenues was
48.7% for the first nine months of 2004. Our consolidated operating income was
Ps.5,348.0 million, 15.9% as a percentage of total revenues during the first
nine months of 2004.
Our consolidated net income before extraordinary items totaled Ps.2,710.9
million for the first nine months of 2004, resulting in an EPS of Ps.1.468
(U.S.$1.291 per ADS) computed on the basis of 1,846.4 million shares
outstanding. Majority net income was Ps.3,893.7 million, resulting in an EPS of
Ps.2.109 (U.S.$1.854 per ADS).
RECENT DEVELOPMENTS
o As we mentioned in our second quarter 2004 press release, we obtained a
favorable final ruling in May 2004 from a Mexican federal court not
subject to appeal allowing us to deduct losses arising from the sale of
shares during 2002. As a result of the ruling, our consolidated net income
for the second quarter of 2004 increased by Ps.1.258 billion (U.S.$98.8
million). In August 2004, we received Ps.1.124 billion in the form of a
cash reimbursement and will receive the balance in the form of a tax
deduction.
o On September 1, 2004, a rights offering of 98,840,861 newly issued Series
L Shares, including Series L Shares in the form of American Depositary
Shares, to holders of our Series L Shares and American Depositary Shares,
as applicable, expired in both the United States and Mexico. The price per
share was the Mexican peso equivalent of U.S.$2.216 per Series L Share or
U.S.$22.16 per American Depositary Share. The rights offering did not have
a significant impact on the ownership structure.
o On October 18, 2004, Mr. Irial Finan, President of Bottling Investments at
The Coca-Cola Company, was named a Series D member of our board and Mr.
Mark Harden, President of The Servicesource, a shared service division of
The Coca-Cola Company, appointed as the alternate director. They replaced
Mr. Steven J. Heyer and Ms. Patricia Powell, respectively.
October 27, 2004 26
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FEMSA
Conference call information and recent developments
--------------------------------------------------------------------------------
CONFERENCE CALL INFORMATION
Our third-quarter 2004 Conference Call will be held on: October 27, 2004,
11:00 A.M. Eastern Time (10:00 A.M. Mexico City Time). To participate in the
conference call, please dial: Domestic U.S.: 800-599-9829 and International:
617-847-8703. We invite investors to listen to the live audiocast of the
conference call on the Company's website, www.cocacola-femsa.com.mx
If you are unable to participate live, an instant replay of the conference call
will be available through November 5, 2004. To listen to the replay please dial:
Domestic U.S.: 888-286-8010 or International: 617-801-6888. Pass code: 98344233.
* * *
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 30 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 September 30, 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 third quarter of 2004, which ended on
September 30, 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.
* * *
(7 pages of tables to follow)
October 27, 2004 27
[LOGO] COCA-COLA
FEMSA
Consolidated Balance Sheet
--------------------------------------------------------------------------------
Consolidated Balance Sheet
Expressed in million of Mexican pesos with purchasing power as of September 30,
2004
--------------------------------------------------------------------------------
Assets Sep-04 Dec-03
--------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents Ps. 3,492 Ps. 2,946
--------------------------------------------------------------------------------
Total accounts receivable 2,333 3,049
--------------------------------------------------------------------------------
Inventories 2,397 2,303
Prepaid expenses 142 211
--------------------------------------------------------------------------------
Total current assets 8,364 8,509
--------------------------------------------------------------------------------
Property, plant and equipment
Property, plant and equipment 29,058 28,841
Accumulated depreciation (11,772) (11,111)
Bottles and cases 1,003 1,013
--------------------------------------------------------------------------------
Total property, plant and equipment, net 18,289 18,743
--------------------------------------------------------------------------------
Investment in shares 421 625
Deferred charges, net 1,287 1,978
Intangibles 35,183 34,270
--------------------------------------------------------------------------------
Total Assets Ps. 63,544 Ps. 64,125
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Liabilities and Stockholders' Equity Sep-04 Dec-03
--------------------------------------------------------------------------------
Current Liabilities
Short-term bank loans and notes Ps. 3,380 Ps. 3,124
Interest payable 393 388
Suppliers 3,399 3,577
Other current liabilities 3,134 2,864
--------------------------------------------------------------------------------
Total Current Liabilities 10,306 9,953
--------------------------------------------------------------------------------
Long-term bank loans 22,157 26,980
Pension plan and seniority premium 528 627
Other liabilities 2,679 2,730
--------------------------------------------------------------------------------
Total Liabilities 35,670 40,290
--------------------------------------------------------------------------------
Stockholders' Equity
Minority interest 665 170
Majority interest:
Capital stock 2,745 2,745
Additional paid in capital 11,744 11,744
Retained earnings of prior years 11,823 9,926
Net income for the period 3,894 2,426
Cumulative results of holding non-monetary assets (2,997) (3,176)
--------------------------------------------------------------------------------
Total majority interest 27,209 23,665
--------------------------------------------------------------------------------
Total stockholders' equity 27,874 23,835
--------------------------------------------------------------------------------
Total Liabilities and Equity Ps. 63,544 Ps. 64,125
--------------------------------------------------------------------------------
October 27, 2004 28
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FEMSA
Consolidated Income Statement
--------------------------------------------------------------------------------
Consolidated Income Statement
Expressed in million of Mexican pesos(1) with purchasing power as of September
30, 2004
------------------------------------------------------------------------------------------------------------
3Q04 3Q03 YTD04 YTD03(2)
----------------------------------------------- --------------------------- -----------------------------
Sales Volume(millions unit cases) 468.9 453.0 1,364.3 968.8
Average price per unit case 24.27 25.07 24.48 26.14
----------------------------------------------- --------------------------- -----------------------------
Net revenues 11,381.9 11,357.8 33,392.0 25,326.8
Other operating revenues 28.7 25.6 148.5 143.4
----------------------------------------------- --------------------------- -----------------------------
Total revenues 11,410.6 11,383.4 33,540.5 25,470.2
Cost of sales 5,823.1 5,826.2 17,199.0 12,836.8
----------------------------------------------- --------------------------- -----------------------------
Gross profit 5,587.5 5,557.2 16,341.5 12,633.4
----------------------------------------------- --------------------------- -----------------------------
Administrative expenses 656.0 658.7 1,958.4 1,372.7
Selling expenses 2,974.0 3,102.3 9,035.0 6,539.4
----------------------------------------------- --------------------------- -----------------------------
Operating expenses 3,630.0 3,761.0 10,993.4 7,912.1
----------------------------------------------- --------------------------- -----------------------------
Operating income 1,957.5 1,796.2 5,348.1 4,721.3
----------------------------------------------- --------------------------- -----------------------------
Interest expense 594.1 705.0 1,830.7 1,210.5
Interest income 163.8 88.3 241.7 223.6
Interest expense, net 430.3 616.7 1,589.0 986.9
Foreign exchange loss (gain) (102.8) 773.7 104.9 1,769.0
Loss (gain) on monetary position (456.2) (448.2) (967.3) (454.8)
----------------------------------------------- --------------------------- -----------------------------
Integral cost of financing (128.7) 942.2 726.6 2,301.1
Other (income) expenses, net (40.4) 21.8 180.1 130.1
----------------------------------------------- --------------------------- -----------------------------
Income before taxes 2,126.6 832.2 4,441.4 2,290.1
Taxes 863.5 276.4 1,730.5 833.6
----------------------------------------------- --------------------------- -----------------------------
Consolidated net income before ext. items 1,263.1 555.8 2,710.9 1,456.5
Extraordinary items -- -- 1,193.8 --
----------------------------------------------- --------------------------- -----------------------------
Consolidated net income 1,263.1 555.8 3,904.7 1,456.5
----------------------------------------------- --------------------------- -----------------------------
Majority net income 1,257.0 545.6 3,893.7 1,440.5
----------------------------------------------- --------------------------- -----------------------------
Minority net income 6.1 10.2 11.0 16.0
----------------------------------------------- --------------------------- -----------------------------
----------------------------------------------- --------------------------- -----------------------------
Operating income 1,957.5 1,796.2 5,348.1 4,721.3
Depreciation 288.0 347.0 910.9 738.9
Amortization and Others (3) 217.9 333.80 776.9 660.0
----------------------------------------------- --------------------------- -----------------------------
EBITDA (4) 2,463.4 2,477.0 7,035.9 6,120.2
----------------------------------------------- --------------------------- -----------------------------
(1) Except volume and average price per unit case figures.
(2) Includes five months from our new territories acquired from Panamco.
(3) Includes returnable bottel breakage expense.
(4) EBITDA = Operating Income + Depreciation +Amortization & Others.
October 27, 2004 29
[LOGO] COCA-COLA
FEMSA
Mexican and Central American operations
--------------------------------------------------------------------------------
Mexican operations
Expressed in million of Mexican pesos(1) with purchasing power as of September 30, 2004
-------------------------------------------------------------------------------------------------------
3Q 04 % Rev 3 Q03 % Rev YTD 04 % Rev
--------------------------------------- ----------- ----------- ------------
Sales Volume(millions unit cases) 256.3 256.2 741.6
Average price per unit case 26.05 27.60 26.47
--------------------------------------- ------- ------ -----
Net revenues 6,675.5 7,069.1 19,626.4
Other operating revenues 31.7 68.6 111.2
--------------------------------------- ------------------- ----------------- -----------------
Total revenues 6,707.2 100.0% 7,137.7 100.0% 19,737.6 100.0%
Cost of sales 3,171.3 47.3% 3,357.7 47.0% 9,297.3 47.1%
--------------------------------------- ------------------- ----------------- -----------------
Gross profit 3,536.0 52.7% 3,780.0 53.0% 10,440.3 52.9%
--------------------------------------- ------------------- ----------------- -----------------
Administrative expenses 395.5 5.9% 367.9 5.2% 1,164.3 5.9%
Selling expenses 1,692.8 25.2% 1,815.8 25.4% 5,234.9 26.5%
--------------------------------------- ------------------- ----------------- -----------------
Operating expenses 2,088.3 31.1% 2,183.7 30.6% 6,399.2 32.4%
--------------------------------------- ------------------- ----------------- -----------------
Operating income 1,447.7 21.6% 1,596.3 22.4% 4,041.2 20.5%
Depreciation, Amortization & Others (2) 289.0 4.3% 362.0 5.1% 965.0 4.9%
--------------------------------------- ------------------- ----------------- -----------------
EBITDA (3) 1,736.7 25.9% 1,958.3 27.4% 5,006.1 25.4%
--------------------------------------- ------------------- ----------------- -----------------
(1) Except volume and average price per unit case figures.
(2) Includes returnable bottle breakage expense.
(3) EBITDA = Operating Income + Depreciation + Amortization & Others.
-------------------------------------------------------------------------------------------------------
Central American operations
Expressed in million of Mexican pesos(1) with purchasing power as of September 30, 2004
-------------------------------------------------------------------------------------------------------
3Q 04 % Rev 3 Q03 % Rev YTD 04 % Rev
--------------------------------------- --------------- ----------------- ---------------------
Sales Volume(millions unit cases) 27.4 26.9 80.8
Average price per unit case 30.78 30.96 31.68
--------------------------------------- ------- ------- --------
Net revenues 843.5 831.6 2,560.1
Other operating revenues (1.7) (3.7) 3.4
--------------------------------------- --------------- ---------------- --------------------
Total revenues 841.8 100.0% 827.9 100.0% 2,563.5 100.0%
Cost of sales 459.1 54.5% 415.2 50.2% 1,340.5 52.3%
--------------------------------------- --------------- ---------------- --------------------
Gross profit 382.7 45.5% 412.7 49.8% 1,223.0 47.7%
--------------------------------------- --------------- ---------------- --------------------
Administrative expenses 69.7 8.3% 57.9 7.0% 200.8 7.8%
Selling expenses 211.9 25.2% 287.2 34.7% 730.6 28.5%
--------------------------------------- --------------- ---------------- --------------------
Operating expenses 281.6 33.5% 345.1 41.7% 931.4 36.3%
--------------------------------------- --------------- ---------------- --------------------
Operating income 101.1 12.0% 67.7 8.2% 291.7 11.4%
Depreciation, Amortization & Others (2) 42.6 5.1% 70.2 8.5% 179.8 7.0%
--------------------------------------- --------------- ---------------- --------------------
EBITDA (3) 143.7 17.1% 137.8 16.6% 471.5 18.4%
--------------------------------------- --------------- ---------------- --------------------
(1) Except volume and average price per unit case figures.
(2) Includes returnable bottle breakage expense.
(3) EBITDA = Operating Income + Depreciation + Amortization & Others.
-------------------------------------------------------------------------------------------------------
October 27, 2004 30
[LOGO] COCA-COLA
FEMSA
Colombian and Venezuelan operations
--------------------------------------------------------------------------------
Colombian operations
Expressed in million of Mexican pesos(1) with purchasing power as of September 30, 2004
------------------------------------------------------------------------------------------------------------------------------------
3Q 04 % Rev 3 Q03 % Rev YTD 04 % Rev
---------------------------------------- ------------------- ------------------- -----------------------
Sales Volume(millions unit cases) 40.5 41.6 122.0
Average price per unit case 23.73 23.52 22.80
--------------------------------------- ------- ------- ---------
Net revenues 960.5 979.1 2,781.4
Other operating revenues -- 0.0 --
---------------------------------------- ------------------- ------------------- -----------------------
Total revenues 960.5 100.0% 979.1 100.0% 2,781.4 100.0%
Cost of sales 495.0 51.5% 521.2 53.2% 1,485.1 53.4%
---------------------------------------- ------------------- ------------------- -----------------------
Gross profit 465.5 48.5% 457.9 46.8% 1,296.3 46.6%
---------------------------------------- ------------------- ------------------- -----------------------
Administrative expenses 32.3 3.4% 87.6 8.9% 132.0 4.7%
Selling expenses 287.3 29.9% 287.7 29.4% 889.7 32.0%
---------------------------------------- ------------------- ------------------- -----------------------
Operating expenses 319.6 33.3% 375.3 38.3% 1,021.7 36.7%
---------------------------------------- ------------------- ------------------- -----------------------
Operating income 145.9 15.2% 82.6 8.4% 274.6 9.9%
Depreciation, Amortization & Others (2) 61.2 6.4% 104.6 10.7% 208.6 7.5%
---------------------------------------- ------------------- ------------------- -----------------------
EBITDA (3) 207.0 21.6% 187.2 19.1% 483.2 17.4%
---------------------------------------- ------------------- ------------------- -----------------------
(1) Except volume and average price per unit case figures.
(2) Includes returnable bottle breakage expense.
(3) EBITDA = Operating Income + Depreciation + Amortization & Others.
------------------------------------------------------------------------------------------------------------------------------------
Venezuelan operations
Expressed in million of Mexican pesos(1) with purchasing power as of September 30, 2004
------------------------------------------------------------------------------------------------------------------------------------
3Q 04 % Rev 3 Q03 % Rev YTD 04 % Rev
---------------------------------------- -------------------- ------------------- ---------------------
Sales Volume(millions unit cases) 45.2 39.7 126.7
Average price per unit case 26.20 24.92 26.73
---------------------------------------- --------- ------- ---------
Net revenues 1,184.3 988.9 3,387.7
Other operating revenues 1.4 0.0 2.4
---------------------------------------- ------------------- ------------------- --------------------
Total revenues 1,185.7 100.0% 988.9 100.0% 3,390.1 100.0%
Cost of sales 674.8 56.9% 589.4 59.6% 1,973.5 58.2%
---------------------------------------- ------------------- ------------------- --------------------
Gross profit 510.9 43.1% 399.5 40.4% 1,416.6 41.8%
---------------------------------------- ------------------- ------------------- --------------------
Administrative expenses 68.8 5.8% 50.2 5.1% 194.2 5.7%
Selling expenses 388.2 32.7% 324.8 32.8% 1,016.3 30.0%
---------------------------------------- ------------------- ------------------- --------------------
Operating expenses 457.0 38.5% 375.0 37.9% 1,210.5 35.7%
---------------------------------------- ------------------- ------------------- --------------------
Operating income 53.8 4.5% 24.5 2.5% 206.1 6.1%
Depreciation, Amortization & Others (2) 55.4 4.7% 78.5 7.9% 171.4 5.1%
---------------------------------------- ------------------- ------------------- --------------------
EBITDA (3) 109.2 9.2% 103.0 10.4% 377.5 11.1%
---------------------------------------- ------------------- ------------------- --------------------
(1) Except volume and average price per unit case figures.
(2) Includes returnable bottle breakage expense.
(3) EBITDA = Operating Income + Depreciation + Amortization & Others.
------------------------------------------------------------------------------------------------------------------------------------
October 27, 2004 31
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FEMSA
Brazilian and Argentine operations
--------------------------------------------------------------------------------
Brazilian operations
Expressed in million of Mexican pesos(1) with purchasing power as of September 30, 2004
-------------------------------------------------------------------------------------------------------------------------------
3Q 04 % Rev 3 Q03 % Rev YTD 04 % Rev
---------------------------------------- -------------------- --------------------- ---------------------
Sales Volume(millions unit cases) 65.6 60.0 190.7
Average price per unit case 17.65 17.07 17.63
---------------------------------------- --------- ------- --------
Net revenues 1,157.9 1,023.8 3,361.7
Other operating revenues 3.5 4.8 11.4
---------------------------------------- -------------------- -------------------- --------------------
Total revenues 1,161.4 100.0% 1,028.7 100.0% 3,373.1 100.0%
Cost of sales 697.7 60.1% 660.8 64.2% 2,065.6 61.2%
---------------------------------------- -------------------- -------------------- --------------------
Gross profit 463.7 39.9% 367.9 35.8% 1,307.5 38.8%
---------------------------------------- -------------------- -------------------- --------------------
Administrative expenses 79.0 6.8% 71.4 6.9% 247.8 7.3%
Selling expenses 272.2 23.4% 275.2 26.8% 798.7 23.7%
---------------------------------------- -------------------- -------------------- --------------------
Operating expenses 351.2 30.2% 346.6 33.7% 1,046.5 31.0%
---------------------------------------- -------------------- -------------------- --------------------
Operating income 112.5 9.7% 21.3 2.1% 261.0 7.7%
Depreciation, Amortization & Others (2) 27.7 2.4% 24.6 2.4% 71.4 2.1%
---------------------------------------- -------------------- -------------------- --------------------
EBITDA (3) 140.3 12.1% 45.9 4.5% 332.3 9.9%
---------------------------------------- -------------------- -------------------- --------------------
(1) Except volume and average price per unit case figures.
(2) Includes returnable bottle breakage expense.
(3) EBITDA = Operating Income + Depreciation + Amortization & Others.
-------------------------------------------------------------------------------------------------------------------------------
Argentine operations
Expressed in million of Mexican pesos(1) with purchasing power as of September 30, 2004
------------------------------------------------------------------------------------------------------------------------------------
3Q 04 % Rev 3 Q03 % Rev YTD 04 % Rev YTD 03 % Rev
---------------------------------------- ---------------- ---------------- ------------------ ------------------
Sales Volume(millions unit cases) 34.0 28.6 102.5 87.3
Average price per unit case 16.64 16.25 16.39 16.06
---------------------------------------- ------- ------- --------- ---------
Net revenues 565.3 465.4 1,679.7 1,402.1
Other operating revenues 27.2 23.7 81.7 76.1
---------------------------------------- ---------------- ---------------- ------------------ ------------------
Total revenues 592.5 100.0% 489.1 100.0% 1,761.4 100.0% 1,478.2 100.0%
Cost of sales 347.7 58.7% 306.8 62.7% 1,059.4 60.1% 952.4 64.4%
---------------------------------------- ---------------- ---------------- ------------------ ------------------
Gross profit 244.9 41.3% 182.4 37.3% 702.0 39.9% 525.8 35.6%
---------------------------------------- ---------------- ---------------- ------------------ ------------------
Administrative expenses 26.4 4.5% 23.4 4.8% 63.3 3.6% 82.3 5.6%
Selling expenses 121.8 20.6% 111.7 22.8% 365.0 20.7% 338.1 22.9%
---------------------------------------- ---------------- ---------------- ------------------ ------------------
Operating expenses 148.2 25.0% 135.0 27.6% 428.3 24.3% 420.4 28.4%
---------------------------------------- ---------------- ---------------- ------------------ ------------------
Operating income 96.7 16.3% 47.3 9.7% 273.7 15.5% 105.4 7.1%
Depreciation, Amortization & Others (2) 29.8 5.0% 40.7 8.3% 91.5 5.2% 132.5 9.0%
---------------------------------------- ---------------- ---------------- ------------------ ------------------
EBITDA (3) 126.5 21.4% 88.0 18.0% 365.1 20.7% 237.9 16.1%
---------------------------------------- ---------------- ---------------- ------------------ ------------------
(1) Except volume and average price per unit case figures.
(2) Includes returnable bottle breakage expense.
(3) EBITDA = Operating Income + Depreciation + Amortization & Others.
------------------------------------------------------------------------------------------------------------------------------------
October 27, 2004 32
[LOGO] COCA-COLA
FEMSA
Selected Information
--------------------------------------------------------------------------------
SELECTED INFORMATION
--------------------------------------------------------------------------------
For the three months ended September 30, 2004
Expressed in million Mexican pesos as of September 30, 2004
--------- ---------
3Q 2003 3Q 2004
--------------------------------------------------------------------------------
Capex 901.0 Capex 498.6
--------------------------------------------------------------------------------
Depreciation 347.0 Depreciation 288.0
--------------------------------------------------------------------------------
Amortization & Others 333.8 Amortization & Others 217.9
--------------------------------------------------------------------------------
VOLUME (MUC)
Expressed in million unit cases
------------------------------------------------------ ------------------------------------------------------
3Q 2003 3Q 2004
------------------------------------------------------ ------------------------------------------------------
Colas Flavors Water Beer Others Total Colas Flavors Water Beer Others Total
--------------------------------------------------------------------------- ------------------------------------------------------
Mexico 154.1 48.6 52.2 0.0 1.3 256.2 155.1 50.8 49.1 0.0 1.3 256.3
Central America 18.8 6.5 1.1 0.0 0.5 26.9 19.1 6.8 1.1 0.0 0.4 27.4
Colombia 25.3 9.9 6.3 0.0 0.1 41.6 26.7 8.1 5.6 0.0 0.1 40.5
Venezuela 21.8 12.2 3.5 0.0 2.2 39.7 23.5 15.3 3.6 0.0 2.8 45.2
Brazil 32.2 13.5 2.3 11.6 0.4 60.0 37.0 14.3 3.3 10.6 0.4 65.6
Argentina 20.9 7.4 0.2 0.0 0.1 28.6 23.6 9.9 0.3 0.0 0.2 34.0
--------------------------------------------------------------------------- ------------------------------------------------------
Total 273.1 98.1 65.6 11.6 4.6 453.0 285.0 105.2 63.0 10.6 5.2 469.0
--------------------------------------------------------------------------- ------------------------------------------------------
PACKAGE MIX BY PRESENTATION
Expressed as a Percentage of Total Volume
--------------------------------------- -----------------------------------------
3Q 2003 3Q 2004
--------------------------------------- -----------------------------------------
Ret Non-Ret Fountain Jug Ret Non-Ret Fountain Jug
------------------------------------------------------------------ -----------------------------------------
Mexico 28.6 54.5 1.3 15.6 28.7 55.5 1.2 14.6
Central America 56.0 38.4 5.6 -- 48.4 47.1 4.5 --
Colombia 55.6 34.2 3.2 7.0 51.2 38.6 3.4 6.8
Venezuela 36.7 55.8 2.9 4.6 30.3 63.1 3.0 3.6
Brazil 11.8 84.2 4.0 -- 10.9 85.8 3.3 --
Argentina 25.3 71.1 3.6 -- 27.1 69.0 3.9 --
------------------------------------------------------------------ -----------------------------------------
For the nine months ended September 30, 2004
Expressed in million Mexican pesos as of September 30, 2004
---------- ----------
YTD 2003 YTD 2004
--------------------------------------------------------------------------------
Capex 1,808.9 Capex 1,219.8
--------------------------------------------------------------------------------
Depreciation 738.9 Depreciation 910.9
--------------------------------------------------------------------------------
Amortization & Others 660.0 Amortization & Others 776.9
--------------------------------------------------------------------------------
VOLUME (MUC)
Expressed in million unit cases
--------------------------------------------------- ------------------------------------------------------
YTD 2003 YTD 2004
--------------------------------------------------- ------------------------------------------------------
Colas Flavors Water Beer Others Total Colas Flavors Water Beer Others Total
-------------------------------------------------------------------------- ------------------------------------------------------
Mexico 446.5 141.2 165.6 0.0 4.5 757.8 447.5 146.0 144.4 0.0 3.7 741.6
Central America 53.7 19.4 3.3 0.0 1.5 77.9 55.7 20.5 3.4 0.0 1.2 80.8
Colombia 77.6 28.6 20.3 0.0 0.2 126.7 79.5 25.4 16.7 0.0 0.4 122.0
Venezuela 60.0 31.1 8.9 0.0 5.7 105.7 67.8 40.4 10.8 0.0 7.7 126.7
Brazil 99.7 45.6 7.5 33.7 1.3 187.8 107.3 41.9 9.0 31.3 1.2 190.7
Argentina 62.7 23.4 0.9 0.0 0.3 87.3 70.5 30.6 0.9 0.0 0.5 102.5
-------------------------------------------------------------------------- ------------------------------------------------------
Total 800.2 289.3 206.5 33.7 13.5 1,343.2 828.3 304.8 185.2 31.3 14.7 1,364.3
-------------------------------------------------------------------------- ------------------------------------------------------
PACKAGE MIX BY PRESENTATION
Expressed as a Percentage of Total Volume
------------------------------------------ --------------------------------------------
YTD 2003 YTD 2004
------------------------------------------ --------------------------------------------
Ret Non-Ret Fountain Jug Ret Non-Ret Fountain Jug
----------------------------------------------------------------- --------------------------------------------
Mexico 27.7 54.5 1.3 16.5 28.5 55.5 1.3 14.7
Central America 52.1 42.3 5.6 -- 49.5 46.1 4.4 --
Colombia 54.0 35.8 3.0 7.2 52.0 38.1 3.3 6.6
Venezuela 36.1 57.5 2.7 3.7 31.1 62.1 2.8 4.0
Brazil 11.7 84.2 4.1 -- 10.8 86.0 3.2 --
Argentina 24.2 71.9 3.9 -- 27.3 69.0 3.7 --
----------------------------------------------------------------- --------------------------------------------
--------------------------------------------------------------------------------
October 27, 2004 33
[LOGO] COCA-COLA
FEMSA
Macroeconomic Information
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
September 2004
Macroeconomic Information
----------------------------------------------------------
Inflation Foreign Exchange Rate
LTM YTD 3Q 04 (Per US Dollar) *
----------------------------------------------------------
--------------------------------------------------------------------------------
Mexico 5.06% 3.37% 1.72% 11.3759
Colombia 5.98% 4.91% 0.62% 2,595.1700
Venezuela 20.83% 14.68% 3.27% 1,920.0000
Brazil 5.96% 4.63% 1.47% 2.8586
Argentina 5.73% 3.97% 1.31% 2.9800
--------------------------------------------------------------------------------
* Figures as of September 30, 2004
--------------------------------------------------------------------------------
October 27, 2004 34