Bloomberg News

Femsa First-Quarter Profit Doubles on Coke, Retail

April 26, 2010

Fomento Economico Mexicano SAB (FEMSAUBD), Latin America’s largest beverage company, said first-quarter profit more than doubled on soft-drink sales and gains at its retail unit.

Net income rose to 1.99 billion pesos ($164 million) from 804.2 million pesos a year earlier, Monterrey, Mexico-based Femsa, as the company is known, said today in a statement on its Web site. Sales climbed 6.2 percent to 46.1 billion pesos.

Femsa’s earnings before interest, depreciation and amortization -- a measure of cash flow known as Ebitda -- rose 6.9 percent to 7.82 billion pesos.

Economic growth in Brazil and Argentina drove sales for soft drinks. Sales at the soft-drink unit, Coca-Cola Femsa, increased 4.7 percent to 23.6 billion pesos. Coca-Cola Femsa’s sales in Brazil and Argentina rose 25 percent on higher prices and an 11 percent increase in shipments.

Oxxo, the company’s convenience-store chain, had sales of 13.5 billion pesos, a 14 percent gain. Sales at the retail unit were spurred by the opening of 950 new stores from a year ago. The company had 7,492 convenience stores at the end of March.

Femsa fell 33 centavos to 58.20 pesos in Mexico City trading at 4:10 p.m. New York time. The shares have dropped 7.1 percent this year.

In Mexico, beer prices rose 9.8 percent on average, countering a 6 percent drop in shipments to 5.52 million hectoliters. Mexico beer revenue rose 3.2 percent to 6.58 billion pesos, while total beer revenue from Mexico, Brazil and exports rose 3.8 percent to 9.58 billion pesos.

Beer Unit Sale

Femsa expects an agreement to sell its beer unit in exchange for a 20 percent stake in Heineken NV (HEIA) to be completed in the “next few days,” after its shareholders approved it today, Chief Financial Officer Javier Astaburuaga said in a conference call with analysts. Femsa valued the transaction at $7.35 billion when it was announced in January. Most relevant regulators and Heineken’s shareholders have approved the deal, he said.

This is the final quarter in which the brewer will report beer unit operating results in earnings. The company said revenue would have been 38.1 billion pesos without the beer unit, compared with 46.1 billion pesos with it, and that operating income would have been 4.36 billion pesos compared with 5.27 billion pesos with the beer business.

Femsa plans capital expenditures of $750 million this year, Astaburuaga said, with $530 million earmarked for its soft-drink unit and $220 million for the convenience-store chain.

To contact the reporter on this story: Thomas Black in Monterrey at tblack@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.


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