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 July 2012

 

FOMENTO ECONÓMICO MEXICANO, S.A.B. 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 León 64410
México

(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 ECONÓMICO MEXICANO, S.A. DE C.V.

 

By: /s/ Javier Astaburuaga

   

Javier Astaburuaga

Chief Financial Officer

 

Date: July 27, 2012

 

 
 

 

 

 

 

FEMSA Retains Revenue Momentum with

Double Digit Growth in 2Q12

  

Monterrey, Mexico, July 27, 2012 — Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) announced today its operational and financial results for the second quarter of 2012 under International Financial Reporting Standards (“IFRS”).

 

Second Quarter 2012 Highlights:

  

·FEMSA consolidated total revenues and income from operations grew 22.9% and 13.0%, respectively, compared to the second quarter of 2011, reflecting growth at FEMSA Comercio and Coca-Cola FEMSA. On an organic basis total revenues and income from operations grew 16.3% and 6.9%, respectively.

  

·Coca-Cola FEMSA total revenues and income from operations increased 27.9% and 7.8%, respectively, compared to the second quarter of 2011. On an organic basis total revenues grew 16.5% and income from operations decreased 0.5%.

  

·FEMSA Comercio achieved total revenues growth of 17.1% and income from operations growth of 27.2%, compared to the second quarter of 2011, driven by new store openings and 7.8% growth in same-store sales.

 

José Antonio Fernández Carbajal, Chairman and CEO of FEMSA, commented: “Our performance in the second quarter was mixed. On the one hand, FEMSA Comercio delivered strong revenue growth, driven by dynamic same-store sales and new store openings, while margins continued to expand. On the other hand, Coca-Cola FEMSA faced a challenging environment and made the most of it. Top-line growth was achieved through pricing, but we continued to see short-term pressure on margins, particularly in Mexico, reflecting among other things raw material and FX pressures, difficult weather comparisons, and the expenses related with the integration of our new territories in Mexico.

 

On the strategic front, we are excited about Jugos del Valle's recently announced acquisition of Santa Clara, a well-known, premium Mexican dairy company, building on the positive learnings from our Estrella Azul dairy operation in Panama, and Coca-Cola FEMSA continues to advance on the due diligence process in the Philippines. So all in all, we have reason to be optimistic about the second half of this year, and beyond.”

 

  

 

 
 

 

 

 

FEMSA Consolidated

 

Total revenues increased 22.9% compared to 2Q11 to Ps. 59.586 billion in 2Q12. Coca-Cola FEMSA and FEMSA Comercio drove the incremental consolidated revenues. On an organic basis total revenues increased 16.3% compared to 2Q11. For the first half of 2012, consolidated total revenues increased 24.4% compared to the same period in 2011 to Ps. 113.854 billion. On an organic basis, total revenues for the first half of 2012 increased 18.5% compared to the same period in 2011.

 

Gross profit increased 24.7% compared to 2Q11 to Ps. 24.993 billion in 2Q12. Gross margin increased 50 basis points compared to the same period in 2011 to 41.9% of total revenues, driven by FEMSA Comercio and by the acquisition-driven growth of Coca-Cola FEMSA which has higher margins than FEMSA Comercio.

 

For the first half of 2012, gross profit increased 25.8% compared to the same period in 2011 to Ps. 47.189 billion. Gross margin increased 40 basis points compared to the same period in 2011 to 41.4% of total revenues, again driven by FEMSA Comercio and by the acquisition-driven growth of Coca-Cola FEMSA which has higher margins than FEMSA Comercio.

 

Income from operations increased 13.0% as compared to 2Q11 to Ps. 6.686 billion in 2Q12. On an organic basis income from operations increased 6.9% compared to the same period in 2011. Consolidated operating margin decreased 100 basis points compared to 2Q11 to 11.2% of total revenues in 2Q12, reflecting additional expenses at Coca-Cola FEMSA including among others: (i) Acquisition-related expenses in Mexico, (ii) higher labor costs in Venezuela and Argentina, iii) higher freight costs in Argentina and Brazil and iv) development of information systems.

 

For the first half of 2012, income from operations increased 14.1% compared to the same period in 2011 to Ps. 11.965 billion. Our consolidated operating margin year-to-date was 10.5% as a percentage of total revenues, a decrease of 100 basis points as compared to the same period of 2011.

 

The effective income tax rate was 23.5% in 2Q12 compared to 32.4% in 2Q11 resulting from a tax shield related to interests on capital, included in a dividend declared in the South America Division of Coca-Cola FEMSA.

 

Net consolidated income increased 28.8% compared to 2Q11 to Ps. 5.437 billion in 2Q12, as a result of (i) growth in FEMSA’s income from operations, (ii) the effect of the devaluation of the Mexican Peso on the US Dollar-denominated component of our cash position, and (iii) a lower effective income tax rate.

 

For the first half of 2012, net consolidated income increased 22.3% to Ps. 9.229 billion compared to the same period of 2011, primarily as a result of growth in income from operations.

 

Net majority income for 2Q12 was Ps. 1.09 per FEMSA Unit1. Net majority income per FEMSA ADS was US$ 0.81 for the second quarter of 2012. For the first half of 2012, net majority income per FEMSA Unit1 was Ps. 1.75 (US$ 1.30 per ADS).

 

Capital expenditures amounted to Ps. 3.164 billion in 2Q12, reflecting incremental investments at Coca-Cola FEMSA and FEMSA Comercio.

 

Our consolidated balance sheet as of June 30, 2012 recorded a cash balance of Ps. 27.494 billion (US$ 2.050 billion), an increase of Ps. 324 million (US$ 24.2 million) compared to December 31, 2011. Short-term debt was Ps. 1.910 billion (US$ 142.4 million), while long-term debt was Ps. 25.574 billion (US$ 1.907 billion). Our consolidated net cash balance was Ps. 10 million (US$ 0.7 million).

 

 

 

 

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 June 30, 2012 was 3,578,226,270, equivalent to the total number of FEMSA Shares outstanding as of the same date, divided by 5.

  

 

 2July 27, 2012
 

  

 

 

Soft Drinks – Coca-Cola FEMSA

 

Coca-Cola FEMSA’s financial results and discussion thereof are incorporated by reference from Coca-Cola FEMSA’s press release, which is attached to this press release or may be accessed by visiting www.coca-colafemsa.com.

 

FEMSA Comercio

 

Total revenues increased 17.1% compared to 2Q11 to Ps. 22.209 billion in 2Q12, mainly driven by the opening of 290 net new stores in the quarter reaching 1,026 total net new store openings for the last twelve months. As of June 30, 2012, FEMSA Comercio had a total of 9,989 convenience stores. Same-store sales increased an average of 7.8% for the second quarter of 2012 over 2Q11, reflecting a 3.7% increase in store traffic and a 3.9% increase in average customer ticket.

 

For the first half of 2012, total revenues increased 17.6% compared to the same period in 2011 to Ps. 41.242 billion. FEMSA Comercio’s same-store sales increased an average of 7.9% compared to the same period in 2011, driven by a 4.8% increase in store traffic and a 3.0% increase in average customer ticket. 

 

Gross profit increased by 18.9% in 2Q12 compared to 2Q11, resulting in a 60 basis point gross margin expansion to 34.5% of total revenues. This increase reflects (i) a positive mix shift due to the growth of higher margin categories, (ii) a more effective collaboration and execution with our key supplier partners combined with a more efficient use of promotion-related marketing resources, and (iii) a better execution of segmented pricing strategies across markets. For the first half of 2012, gross margin expanded by 70 basis points compared to the same period in 2011 to 33.5% of total revenues.

 

Income from operations increased 27.2% over 2Q11 to Ps. 1.830 billion in 2Q12. Operating expenses increased 16.5% to Ps. 5.822 billion, reflecting the growing number of stores as well as incremental expenses relating to, among other things, the continued strengthening of FEMSA Comercio’s organizational structure and a rise in electricity tariffs. Operating margin expanded 60 basis points compared to 2Q11, to 8.2% of total revenues in 2Q12. For the first half of 2012, income from operations increased 27.2% compared to the same period in 2011 to Ps. 2.630 billion, resulting in an operating margin of 6.4%, which represents a 50 basis point expansion from the same period in the prior year.

  

 

 

 3July 27, 2012
 

 

 

 

CONFERENCE CALL INFORMATION: 

 

Our Second Quarter of 2012 Conference Call will be held on: Friday July 27, 2012, 11:00 AM Eastern Time (10:00 AM Mexico City Time). To participate in the conference call, please dial: Domestic US: (800) 500-0920 International: (719) 325-2336, Conference Id: 5082934. The conference call will be webcast live through streaming audio. For details please visit www.femsa.com/investor.

 

If you are unable to participate live, the conference call audio will be available on http://ir.FEMSA.com/results.cfm.

 

 

FEMSA is a leading company that participates in the beverage industry through Coca-Cola FEMSA, the largest bottler of Coca-Cola products in the world; in the retail industry through FEMSA Comercio, operating OXXO, the largest and fastest-growing chain of stores in Latin America, and in the beer industry, through its ownership of the second largest equity stake in Heineken, one of the world’s leading brewers with operations in over 70 countries.

 

The translations of Mexican Pesos into US Dollars are included solely for the convenience of the reader, using the noon day buying rate for pesos as published by the Federal Reserve Bank of New York for June 30, 2012, which was 13.4110 Mexican Pesos per US Dollar.

 

 

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’s expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact our actual performance.

 

 

Five pages of tables and Coca-Cola FEMSA’s press release follow.

 

 

 

 4July 27, 2012
 

 

  

FEMSA
Consolidated Income Statement
Millions of Pesos

 

    For the second quarter of:   For the first six months of:
    2012 (A) % of rev. 2011 % of rev. % Var. % Org (B)   2012 (A) % of rev. 2011 % of rev. % Var. % Org (B)
Total revenues   59,586 100.0 48,465 100.0 22.9 16.3   113,854 100.0 91,535 100.0 24.4         18.5
Cost of sales   34,593 58.1 28,417 58.6 21.7     66,665 58.6 54,033 59.0 23.4  
Gross profit   24,993 41.9 20,048 41.4 24.7     47,189 41.4 37,502 41.0 25.8  
Administrative expenses   2,661 4.5 2,016 4.2 32.0     5,005 4.4 3,857 4.2 29.8  
Selling expenses   15,544 26.0 12,073 24.9 28.8     30,195 26.5 23,105 25.2 30.7  
Other Operating expenses (income), net (1)   102 0.2 43 0.1  N.A.     24 - 51 0.1  (52.9)  
Income from operations(2)   6,686 11.2 5,916 12.2 13.0 6.9   11,965 10.5 10,489 11.5 14.1 8.8
Other Non-Operating expenses (income)   501   95    N.A.     275   148   85.8  
Interest expense   571   534   6.9     1,188   1,016   16.9  
Interest income   189   257    (26.5)     364   459    (20.7)  
Interest expense, net   382   277   37.9     824   557   47.9  
Foreign exchange (loss) gain   404    (107)    N.A.      (54)   (287)    (81.2)  
Other net finance results gain (loss)    (4)   6    N.A.     23   82    (72.0)  
Integral result of financing   18   (378)   N.A.      (855)    (762)   12.2  
Income before income tax   6,203   5,443   14.0     10,835   9,579   13.1  
Income tax   1,456   1,762   (17.4)     2,923   3,128    (6.6)  
Participation in Heineken results(3)   690   540   27.8     1,317   1,098   19.9  
Net consolidated income   5,437   4,221   28.8     9,229   7,549   22.3  
Net majority income   3,897   2,844   37.0     6,259   5,035   24.3  
Net minority income   1,540   1,377   11.8     2,970   2,514   18.1  

 

    2012 (A) % of rev. 2011 % of rev. % Var. % Org (B)   2012 (A) % of rev. 2011 % of rev. % Var. % Org (B)
Operative Cash Flow & CAPEX                            
Income from operations   6,686 11.2 5,916 12.2 13.0 6.9   11,965 10.5 10,489 11.5 14.1 8.8
Depreciation   1,750 2.9 1,341 2.8 30.5     3,470 3.0 2,618 2.9 32.5  
Amortization & other non-cash charges   442 0.8 168 0.3 N.A.     683 0.7 313 0.3 N.A.  
Operative Cash Flow (EBITDA)   8,878 14.9 7,425 15.3 19.6 12.2   16,118 14.2 13,420 14.7 20.1 13.6
CAPEX   3,164   2,946   7.4     5,326   4,246   25.4  
                             
Financial Ratios   2012 (A)   2011    Var. p.p.                
Liquidity(4)   1.48   1.54    (0.06)                
Interest coverage(5)   23.24   26.81    (3.56)                
Leverage(6)   0.38   0.37   0.01                
Capitalization(7)   12.60%   13.35%    (0.75)                

 

(A) We integrated the beverage divisions of Grupo Tampico, Grupo CIMSA and FOQUE in Coca Cola FEMSA´s operations since October 2011, December 2011 and May 2012, respectively.
(B) % Org. represents the variation in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.
 
(1) Other Operating expenses (income), net = Other Operating expenses (income) +(-) Equity method from operated associates.
(2) Income from operations = Gross profit - Administrative and selling expenses - Other operating expenses (income), net.
(3) Represents the equity method participation in Heineken´s results, net.
(4) Total current assets / total current liabilities. 
(5) Income from operations + depreciation + amortization & other / interest expense, net.
(6) Total liabilities / total stockholders' equity. 
(7) Total debt / long-term debt + stockholders' equity.
Total debt = short-term bank loans + current maturities of long-term debt + long-term bank loans.

  

 

 

 5July 27, 2012
 

 

 

 

FEMSA
Consolidated Balance Sheet
Millions of Pesos

 

ASSETS   Jun-12 Dec-11 % Var.
Cash and cash equivalents   27,494 27,170 1.2
Accounts receivable   8,931 10,498               (14.9)
Inventories   14,543 14,360 1.3
Other current assets   8,134 6,913 17.7
Total current assets   59,102 58,941 0.3
Investments in shares   73,724 78,643  (6.3)
Property, plant and equipment, net   56,531 54,282 4.1
Intangible assets (1)   68,864 62,962 9.4
Other assets   8,391 8,816  (4.8)
TOTAL ASSETS   266,612 263,644 1.1
         
LIABILITIES & STOCKHOLDERS´ EQUITY        
Bank loans   588 638  (7.8)
Current maturities of long-term debt   1,322 4,935  (73.2)
Interest payable        215 216  (0.5)
Operating liabilities   37,889 32,494 16.6
Total current liabilities   40,014 38,283 4.5
Long-term debt (2)   25,574 23,137 10.5
Labor liabilities   2,757 2,584 6.7
Other liabilities   5,682 7,646               (25.7)
Total liabilities   74,027 71,650 3.3
Total stockholders’ equity   192,585 191,994 0.3
LIABILITIES AND STOCKHOLDERS’ EQUITY   266,612 263,644 1.1

 

     
   June 30, 2012
DEBT MIX (2) % of Total Average Rate
Denominated in:    
Mexican pesos 56.6% 6.8%
Dollars 35.3% 3.6%
Colombian pesos 3.6% 6.9%
Argentine pesos 3.1% 18.3%
Brazilian Reais 1.4% 9.3%
Total debt 100.0% 6.0%
     
Fixed rate(2) 60.3%  
Variable rate(2) 39.7%  

 

 

% of Total Debt 2012 2013 2014 2015 2016 2017 2018+
DEBT MATURITY PROFILE 4.2% 17.2% 15.9% 10.5% 9.2% 9.1% 33.9%

 

(1) Includes mainly the intangible assets generated by acquisitions.
(2) Includes the effect of derivative financial instruments on long-term debt.

 

 

 

 6July 27, 2012
 

 

 

 

Coca-Cola FEMSA
Results of Operations
Millions of Pesos

 

    For the second quarter of:   For the first six months of:
    2012 (A) % of rev. 2011 % of rev. % Var. % Org (B)   2012 (A) % of rev. 2011 % of rev. % Var. % Org (B)
Total revenues   36,295 100.0 28,388 100.0 27.9 16.5%   70,356 100.0 54,390 100.0 29.4 19.5%
Cost of sales   19,593 54.0 15,348 54.1 27.7     38,191 54.3 29,481 54.2 29.5  
Gross profit   16,702 46.0 13,040 45.9 28.1     32,165 45.7 24,909 45.8 29.1  
Administrative expenses   1,777 4.9 1,275 4.5 39.4     3,331 4.7 2,440 4.5 36.5  
Selling expenses   10,160 28.0 7,357 25.9 38.1     19,752 28.1 14,223 26.1 38.9  
Other Operating expenses (income), net 51 0.1 35 0.1 45.7     (11) - 39 0.1  N.A.  
Income from operations   4,714 13.0 4,373 15.4 7.8 -0.5%   9,093 12.9 8,207 15.1 10.8 4.1%
Depreciation   1,230 3.4 904 3.2 36.1     2,444 3.5 1,755 3.2 39.3  
Amortization & other non-cash charges   365 1.0 107 0.4  N.A.     532 0.8 182 0.4  N.A.  
Operative Cash Flow   6,309 17.4 5,384 19.0 17.2 7.0%   12,069 17.2 10,144 18.7 19.0 10.4%
CAPEX   1,969   1,814   8.5     3,243   2,447   32.6  
                             
Sales volumes                    
(Millions of unit cases)                            
Mexico and Central America   504.3 65.5 402.2 60.4 25.4 -1.0%   916.8 62.2 733.9 57.8 24.9 1.0%
South America   265.7 34.5 263.4 39.6 0.9 0.9%   556.3 37.8 536.6 42.2 3.7 3.7%
Total   770.0 100.0 665.6 100.0 15.7 -0.2%   1,473.1 100.0 1,270.5 100.0 15.9 2.1%

 

(A) We integrated the beverage divisions of Grupo Tampico, Grupo CIMSA and FOQUE in Coca Cola FEMSA´s operations since October 2011, December 2011 and May 2012, respectively.
 
(B) % Org. represents the variation in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability.

 

 

 

 

 7July 27, 2012
 

 

 

 

FEMSA Comercio
Results of Operations
Millions of Pesos

 

    For the second quarter of:    For the first six months of:
    2012 % of rev. 2011 % of rev. % Var.   2012 % of rev. 2011 % of rev. % Var.
Total revenues   22,209 100.0 18,973 100.0 17.1   41,242 100.0 35,083 100.0 17.6
Cost of sales   14,557 65.5 12,538 66.1 16.1   27,434 66.5 23,588 67.2 16.3
Gross profit   7,652 34.5 6,435 33.9 18.9   13,808 33.5 11,495 32.8 20.1
Administrative expenses   421 1.9 351 1.8 19.9   807 2.0 685 2.0 17.8
Selling expenses   5,354 24.2 4,642 24.5 15.3   10,351 25.1 8,738 24.9 18.5
Other Operating expenses (income), net   47 0.2 3 -  N.A.   20 - 5 -  N.A.
Income from operations   1,830 8.2 1,439 7.6 27.2   2,630 6.4 2,067 5.9 27.2
Depreciation   475 2.1 404 2.1 17.6   934 2.3 801 2.3 16.6
Amortization & other non-cash charges   74 0.4 40 0.2 85.0   115 0.2 79 0.2 45.6
Operative Cash Flow   2,379 10.7 1,883 9.9 26.3   3,679 8.9 2,947 8.4 24.8
CAPEX   1,120   921   21.6   1,847   1,641   12.6
                         
Information of OXXO Stores                        
Total stores               9,989   8,963   11.4
Net new convenience stores   290   342    (15.2)   428  (2) 537  (2) (20.3)
                         
Same store data: (1)                        
Sales (thousands of pesos)   721.8   669.8   7.8   677.8   628.3   7.9
Traffic (thousands of transactions)   26.7   25.7   3.7   25.7   24.5   4.8
Ticket (pesos)   27.1   26.1   3.9   26.4   25.6   3.0

 

(1) Monthly average information per store, considering same stores with more than 12 months of operations.
(2) For the last twelve months for each period.

 

 

 

 

 8July 27, 2012
 

 

 

 

FEMSA
Macroeconomic Information

 

      End of period, Exchange Rates
  Inflation Jun-12 Jun-11
             
  2Q 2012 LTM  June-12 Per USD Per Mx. Peso Per USD Per Mx. Peso
Mexico -0.17% 4.34% 13.65 1.0000 11.84 1.0000
Colombia 0.53% 3.19% 1,784.60 0.0077 1,780.16 0.0067
Venezuela 3.82% 21.33% 4.30 3.1751 4.30 2.7532
Brazil 1.08% 4.92% 2.02 6.7546 1.56 7.5837
Argentina 2.38% 9.90% 4.53 3.0159 4.11 2.8805
Euro Zone 0.25% 2.35% 0.81 16.8678 0.70 16.9899

  

 

 

 

 9July 27, 2012
 

 

 

 

2012 SECOND-QUARTER AND FIRST SIX-MONTH RESULTS

 

       Second Quarter        YTD    
    2012 2011 Reported Δ% Excluding M&A
Effects Δ%(5)		   2012 2011 Reported Δ% Excluding M&A
Effects Δ%(5)
  Total Revenues 36,295 28,388 27.9% 16.5%   70,356 54,390 29.4% 19.5%
  Gross Profit 16,702 13,040 28.1%     32,165 24,909 29.1%  
  Operating Income 4,714 4,373 7.8% -0.5%   9,093 8,207 10.8% 4.1%
  Net Controlling Interest Income 2,713 2,749 -1.3%     5,393 4,958 8.8%  
  Operative cash flow(1) 6,309 5,384 17.2% 7.0%   12,069 10,144 19.0% 10.4%
  Net Debt (2) 11,997 10,344 16.0%            
  Net Debt / Operative cash flow (3) 0.49 0.44              
  Operative cash flow/ Interest Expense, net (3) 18.70 21.31              
  Earnings per Share (3) 5.61 5.76              
  Capitalization (4) 18.1% 20.5%              
  Expressed in millions of Mexican pesos. 
  (1)  Operative cash flow = Operating income + Depreciation + Amortization & Other operative Non-cash Charges.
  See reconciliation table on page 8 except for Earnings per Share
  (2)  Net Debt = Total Debt - Cash
  (3)  LTM figures
  (4)  Total debt / (long-term debt + shareholders' equity)
  (5)   Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure,  management has used its best judgment, estimates and assumptions in order to maintain comparability.
   
  •  Reported total revenues reached Ps. 36,295 million in the second quarter of 2012, an increase of 27.9% as compared to the second quarter of 2011, mainly as a result of double-digit revenue growth in both divisions, including the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in our Mexican territories. Excluding the recently integrated territories in Mexico, total revenues increased 16.5%.
  •  Reported consolidated operating income grew 7.8% to Ps. 4,714 million for the second quarter of 2012, driven by double-digit growth in our South America division and the integration of the new territories in Mexico. Our reported operating margin was 13.0% in the second quarter of 2012.
  •  Reported consolidated net controlling interest income reached Ps. 2,713 million in the second quarter of 2012.
   
  Mexico City (July 24, 2012), Coca-Cola FEMSA, S.A.B. de C.V. (BMV: KOFL, NYSE: KOF) (“Coca-Cola FEMSA” or the “Company”), the largest franchise bottler in the world, announces results for the second quarter of 2012.
   
  "In the face of bad weather conditions in several markets and ongoing currency and commodity volatility, we produced positive results for the second quarter. Consistent with our strategic framework, we continue to pursue growth through accretive mergers and acquisitions. As of May 2012, we started the integration of Grupo Fomento Queretano into our Mexican operations. In fact, we are fully on track to meet our previously announced net synergy targets for our series of mergers announced in 2011. Moreover, during the quarter, we initiated the on-the-ground evaluation process of The Coca-Cola Company's bottling franchise in the Philippines. Furthermore, through Jugos del Valle, our joint venture for non-carbonated products with our partner, The Coca-Cola Company, we took an additional step to reinforce our portfolio with the announcement of the acquisition of Santa Clara, a significant player in the milk and dairy category in Mexico. In summary, our operators' proven capabilities provide us with the flexibility to continue delivering positive results, while building for the future of our business—positioning our company to capture the opportunities that we see ahead in the industry and to generate incremental value for our shareholders," said Carlos Salazar Lomelin, Chief Executive Officer of the Company.

 

 

 

 

 

 

July 24, 2012Page 10
 

  

 

 

CONSOLIDATED RESULTS

 

Our reported total revenues increased 27.9% to Ps. 36,295 million in the second quarter of 2012, compared to the second quarter of 2011 as a result of double-digit total revenue growth in both divisions, including the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in our Mexican operations(1). Excluding the recently integrated territories in Mexico, total revenues grew 16.5%. On a currency neutral basis and excluding the recently merged territories in Mexico, total revenues grew 12.3%, driven by average price per unit case growth in every territory and volume growth mainly in Venezuela, Argentina and Brazil.

 

Total sales volume increased 15.7% to reach 770.0 million unit cases in the second quarter of 2012 as compared to the same period in 2011. Excluding the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico, volumes remained flat at 664.0 million unit cases. On the same basis, the still beverage category grew 12%, mainly driven by the introduction of the Jugos del Valle line of business in Venezuela, the performance of the Jugos del Valle line in Mexico and Brazil and the launch of Fuze Tea in most of our territories. Our sparkling beverage category remained flat while our bottled water portfolio, including bulk water, declined 6%.

 

Our reported gross profit increased 28.1% to Ps. 16,702 million in the second quarter of 2012, as compared to the second quarter of 2011. Reported cost of goods sold increased 27.7%, mainly as a result of increased cost of high fructose corn syrup (HFCS) in Mexico and Argentina in combination with the depreciation of the average exchange rate of the Brazilian real(2) and the Mexican peso(2) and certain other operating currencies(2) as applied to our U.S. dollar-denominated raw material costs; which were offset by lower PET prices in most of our territories and lower sugar prices in our South America division. Reported gross margin reached 46.0%, an expansion of 10 basis points as compared to the second quarter of 2011.

 

Our reported operating income increased 7.8% to Ps. 4,714 million in the second quarter of 2012, driven by double-digit operating income growth in the South America division, and including the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico. Our reported operating margin reached 13.0% in the second quarter of 2012, as compared with 15.4% in the same period of 2011. Excluding the integration of the recently merged territories in Mexico, operating income remained flat. On the same basis, operating expenses increased in the second quarter of 2012, mainly as a result of (i) higher labor costs in Venezuela in combination with higher labor and freight costs in Argentina and higher freight costs in Brazil, (ii) increased marketing investment to reinforce our execution in the marketplace, widen our cooler coverage and broaden our returnable base availability across our territories and the depreciation associated with these investments, (iii) additional expenses related to the development of information systems and commercial capabilities in connection with our commercial models and (iv) certain investments related, among others, to the development of new lines of business.

 

During the second quarter of 2012, we recorded an expense of Ps. 469 million in the other non-operative expenses, net line. This expense mainly reflects a one-time provision related to a change in labor law in Venezuela.

 

Our comprehensive financing result in the second quarter of 2012 recorded an expense of Ps. 478 million as compared to an expense of Ps. 318 million in the same period of 2011. This difference was mainly driven by a higher interest expense, net.

 

During the second quarter of 2012, income tax, as a percentage of income before taxes, was 24.2% as compared to 28.7% in the same period of 2011. The lower effective tax rate registered during the quarter, resulted from a tax shield related to interests on capital, included in a dividend declared by our Brazilian subsidiary.

 

Our reported consolidated net controlling interest income reached Ps. 2,713 million in the second quarter of 2012. Earnings per share (EPS) in the second quarter of 2012 were Ps. 1.35 (Ps. 13.47 per ADS) computed on the basis of 2,014.2 million shares(3) (each ADS represents 10 local shares).

 

  

 

(1) Our Mexican operations include Grupo Tampico’s results as of October, 2011, Grupo CIMSA’s results as of December, 2011 and Grupo Fomento Queretano’s results as of May, 2012

(2) See page 12 for average and end of period exchange rates for the second quarter of 2012 and first six months

(3) According to International Financial Reporting Standards (IFRS), Earnings Per Share is computed on the basis of the weighted-average number of shares outstanding during the period. The weighted average number of shares is calculated based on the number of days within a reporting period that each share was outstanding, divided by the full length of that reporting period

 

 

July 24, 2012Page 11
 

 

 

 

BALANCE SHEET

 

As of June 30, 2012, we had a cash balance of Ps. 9,192 million, including US$ 259 million denominated in U.S. dollars, a decrease of Ps. 2,981 million compared to December 31, 2011. This difference was mainly driven by the payment at maturity of one of our Certificados Bursátiles in the amount of Ps. 3,000 million during March, 2012 and the payment of our dividend in the amount of Ps. 5,625 million during May, 2012; net of the cash generated by our operations and debt assumed during the quarter.

 

As of June 30, 2012, total short-term debt was Ps. 1,869 million and long-term debt was Ps. 19,320 million. Total debt decreased by Ps. 1,328 million, compared to year end 2011. Net debt increased Ps. 1,653 million compared to year end 2011. The Company’s total debt balance includes U.S. dollar-denominated debt in the amount of US$ 715 million.(1) This debt balance includes US$ 200 million in U.S. dollar-denominated bilateral bank loans assumed during the second quarter.

 

The weighted average cost of debt for the quarter was 6.1%. The following charts set forth the Company’s debt profile by currency and interest rate type and by maturity date as of June 30, 2012.

 

Currency % Total Debt(1) % Interest Rate Floating(1)(2)
Mexican pesos 45.0% 30.0%
U.S. dollars 45.9% 9.4%
Colombian pesos 4.7% 80.0%
Brazilian reals 0.4% 0.0%
Argentine pesos 3.9% 22.3%
(1)After giving effect to cross-currency swaps and interest rate swaps
(2)Calculated by weighting each year’s outstanding debt balance mix

 

Debt Maturity Profile

 

The weighted average life of our debt profile is 4.8 years.

 

Maturity Date 2012 2013 2014 2015 2016 2017 +
% of Total Debt 5.3% 5.6% 19.9% 13.4% 11.8% 44.0%

 

Consolidated Cash Flow

 

The following cash flow statement is presented on a historical basis, whereas the balance sheet included on page 9 is presented in nominal terms. Certain differences resulting from calculations performed with the information contained in the balance sheet may differ from items shown in this cash flow statement. These differences are presented separately as a part of the Translation Effect in the cash flow statement in accordance with International Financial Reporting Standards. For more detailed information about our consolidated cash flow statement, please refer to the cash flow contained in our quarterly filing to the Mexican Stock Exchange (Bolsa Mexicana de Valores or BMV) available at www.bmv.com.mx in the Información Financiera section for Coca-Cola FEMSA (KOF).

 

Consolidated Cash Flow    
Expressed in millions of Mexican pesos (Ps.) as of June 30, 2012    
   Jun-12 
   Ps. 
Income before taxes   7,978 
Non cash charges to net income   3,542 
    11,520 
Change in working capital   (1,810)
Resources Generated by Operating Activities   9,710 
Investments   (4,244)
Debt increase   (1,370)
Dividends declared and paid   (5,584)
Other   (1,037)
Increase in cash and cash equivalents   (2,525)
Cash, cash equivalents and marketable securities at begining of period   12,173 
Translation Effect   (456)
Cash, cash equivalents and marketable securities at end of period   9,192 

 

 

 

July 24, 2012Page 12
 

 

 

 

MEXICO & CENTRAL AMERICA DIVISION OPERATING RESULTS (Mexico, Guatemala, Nicaragua, Costa Rica and Panama)

 

Coca-Cola FEMSA is including the results of Grupo Tampico as of October 2011, Grupo CIMSA as of December 2011and Grupo Fomento Queretano as of May 2012 in the Company’s Mexico & Central America divisions’ operating results.

 

Revenues

 

Reported total revenues from our Mexico and Central America division increased 30.2% to Ps. 17,613 million in the second quarter of 2012, as compared to the same period in 2011, supported by the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in our Mexican operations(1). Excluding the recently integrated territories in Mexico, total revenues grew 6.2%. On the same basis, increased average price per unit case, mainly reflecting selective price increases across our product portfolio, implemented over the past several months, accounted for the majority of incremental total revenues. On a currency neutral basis and excluding the recently merged territories in Mexico, total revenues increased 4.3%.

 

Reported total sales volume increased 25.4% to 504.3 million unit cases in the second quarter of 2012, as compared to the second quarter of 2011. Excluding the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico, volumes declined 1.0% to 398.3 million unit cases. On the same basis, still beverages grew 6% mainly driven by the Jugos del Valle line of products, the successful launch of the Fuze Tea brand in Mexico, Costa Rica and Panama and the performance of the Estrella Azul portfolio in Panama. The sparkling beverage category grew close to 1%. Growth in these categories was offset by an 8% decline in our bottled water portfolio, including bulk water.

 

Operating Income

 

Our reported gross profit increased 25.4% to Ps. 8,359 million in the second quarter of 2012 as compared to the same period in 2011. Reported cost of goods sold increased 34.8% as a result of higher HFCS costs in Mexico in combination with the depreciation of the average exchange rate of the Mexican peso(2) as applied to our U.S. dollar-denominated raw material costs; which were partially offset by lower PET prices in the division. Reported gross margin reached 47.5% in the second quarter of 2012, as compared with 49.3% in the same period of the previous year.

 

Reported operating income increased 4.6% to Ps. 2,656 million in the second quarter of 2012, compared to Ps. 2,538 million in the same period of 2011. Our reported operating margin was 15.1% in the second quarter of 2012, as compared with 18.8% in the same period of 2011. Excluding the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico, operating income declined 9.6%. On the same basis, operating expenses increased mainly as a result of (i) additional expenses related to the development of information systems and commercial capabilities in connection with our commercial models, (ii) continued marketing investments across the division and the depreciation expenses resulting from investments in coolers and the reinforcement of our returnable base and (iii) certain investments related to the development of new lines of business.

 

 

 

(1) Our Mexican operations include Grupo Tampico’s results as of October, 2011, Grupo CIMSA’s results as of December, 2011 and Grupo Fomento Queretano’s results as of May, 2012

(2) See page 12 for average and end of period exchange rates for the second quarter of 2012 and first six months

 

 

 

July 24, 2012Page 13
 

 

 

 

 

SOUTH AMERICA DIVISION OPERATING RESULTS (Colombia, Venezuela, Brazil and Argentina)

 

Volume and average price per unit case exclude beer results.

 

Revenues

 

Reported total revenues were Ps. 18,682 million in the second quarter of 2012, an increase of 25.8% as compared to the same period of 2011 mainly as a result of double-digit total revenue growth in Venezuela, Argentina and Colombia. Excluding beer, which accounted for Ps. 961 million during the quarter, revenues increased 26.5% to Ps. 17,721 million. Excluding beer, higher average prices per unit case across our operations accounted for more than 95% of incremental revenues and volume growth in Venezuela, Argentina and Brazil contributed the balance. On a currency neutral basis, total revenues increased 19.5%.

 

Reported total sales volume in our South America division increased 0.9% to 265.7 million unit cases in the second quarter of 2012 as compared to the same period of 2011, as a result of volume growth in Venezuela, Argentina and Brazil, which compensated for the volume decline in Colombia. The still beverage category grew 21%, mainly driven by the introduction of the Jugos del Valle line of business in Venezuela and its continued success in Brazil, alongside the launch of Fuze Tea in Venezuela and Colombia. Our water portfolio, including bulk water, grew 2% and our sparkling beverage category remained flat.

 

Operating Income

 

Reported gross profit reached Ps. 8,343 million, an increase of 30.9% in the second quarter of 2012, as compared to the same period of 2011. Reported cost of goods sold increased 21.9%. Lower cost of PET in most of the territories and lower cost of sugar in the division, was partially offset by the depreciation of the average exchange rate of the Brazilian real(1) and the Argentine peso(1) as applied to our U.S. dollar-denominated raw material costs. Reported gross margin reached 44.7% in the second quarter of 2012, an expansion of 180 basis points as compared to the same period of 2011.

 

Our reported operating income increased 12.2% to Ps. 2,058 million in the second quarter of 2012, compared to the same period of 2011. Reported operating expenses increased 38.8%, mainly as a result of (i) higher labor costs in Venezuela in combination with higher labor and freight costs in Argentina and higher freight costs in Brazil and (ii) increased marketing investment to reinforce our execution in the marketplace, widen our cooler coverage and broaden our returnable base availability across the division and the depreciation associated with these investments. Our reported operating margin was 11.0% in the second quarter of 2012 as compared with 12.4% in the same period of 2011.

  

 

(1) See page 12 for average and end of period exchange rates for the second quarter of 2012 and first six months

 

 

July 24, 2012Page 14
 

 

 

 

SUMMARY OF SIX-MONTH RESULTS

 

Our consolidated total revenues increased 29.4% to Ps. 70,356 million in the first six months of 2012, as compared to the same period of 2011, as a result of double-digit total revenue growth in both divisions, including the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in our Mexican operations.(1) Excluding the recently integrated territories in Mexico, total revenues grew 19.5%. On a currency neutral basis and excluding the recently merged territories in Mexico, total revenues increased 14.9% in the first half of 2012.

 

Total sales volume increased 15.9% to 1,473.1 million unit cases in the first six months of 2012, as compared to the same period in 2011. Excluding the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico, volumes grew 2.1% to 1,297.3 million unit cases. On the same basis, the sparkling beverage category grew 2%, driven by a 2% growth of the Coca-Cola brand and a 5% growth in flavored sparkling beverages. The still beverage category grew 12%, mainly driven by the performance of the Jugos del Valle line of business across our territories. These increases more than compensated for a 3% decline in our bottled water portfolio, including bulk water.

 

Our gross profit increased 29.1% to Ps. 32,165 million in the first six months of 2012, as compared to the same period of 2011. Cost of goods sold increased 29.5% mainly as a result of higher sweetener costs in the majority of our operations, in addition to the depreciation of the Brazilian real,(1) the Mexican peso(1) and the Argentine peso(1) as applied to our U.S. dollar-denominated raw material costs. Gross margin remained flat at 45.7% for the first six months of 2012 as compared to the same period of 2011.

 

Our consolidated operating income increased 10.8% to Ps. 9,093 million in the first six months of 2012, as compared to the same period of 2011, mainly driven by double-digit operating income growth in our South America division and the integration of Grupo Tampico, Grupo CIMSA and Grupo Fomento Queretano in Mexico. Our reported operating margin was 12.9% for the first six months of 2012, as compared to 15.1% in the same period of 2011. Excluding the integration of the recently merged territories in Mexico, operating income grew 4.1%. On the same basis, operating expenses increased, mainly as a result of (i) higher labor costs in Venezuela, in combination with higher labor and freight costs in Argentina and higher freight costs in Brazil, (ii) increased marketing investment to reinforce our execution in the marketplace, widen our cooler coverage and broaden our returnable base availability across our territories and the depreciation associated with these investments, (iii) additional expenses related to the development of information systems and commercial capabilities in connection with our commercial models and (iv) certain investments related, among others, to the development of new lines of business.

 

Our consolidated net controlling interest income increased 8.8% to Ps. 5,393 million in the first six months of 2012 as compared to the same period of 2011. Earnings per share (EPS) in the first six months of 2012 were Ps. 2.70 (Ps. 26.97 per ADS) computed on the basis of 1,999.8 million shares(3) outstanding (each ADS represents 10 local shares).

 

 

 

(1) Our Mexican operations include Grupo Tampico’s results as of October, 2011, Grupo CIMSA’s results as of December, 2011 and Grupo Fomento Queretano’s results as of May, 2012

(2) See page 12 for average and end of period exchange rates for the second quarter of 2012 and first six months.

(3) According to International Financial Reporting Standards (IFRS), Earnings Per Share is computed on the basis of the weighted-average number of shares outstanding during the period. The weighted average number of shares is calculated based on the number of days within a reporting period that each share was outstanding, divided by the full length of that reporting period

 

 

 

 

July 24, 2012Page 15
 

 

 

 

RECENT DEVELOPMENTS

 

•On May 7, 2012, Coca-Cola FEMSA and Grupo Fomento Queretano and its shareholders announced the successful merger of Grupo Fomento Queretano’s beverage division with Coca-Cola FEMSA. This transaction received all necessary approvals, including the approval of the Comisión Federal de Competencia, the Mexican antitrust authority, and The Coca-Cola Company. Subsequently, Coca-Cola FEMSA held an extraordinary shareholders meeting on May 4, 2012, at which the Company’s shareholders approved this merger. Our Mexican operations include Grupo Fomento Queretano’s results as of May, 2012.
   
•On July 11, 2012, Jugos del Valle, which is jointly owned by The Coca-Cola Company and the Coca-Cola bottling system, received regulatory approval to acquire Santa Clara, one of the leading players in milk, ice cream and dairy related products in Mexico. This will allow the Coca-Cola bottling system to reinforce its portfolio of non-carbonated beverages.

 

CONFERENCE CALL INFORMATION

 

Our second-quarter 2012 Conference Call will be held on July 24, 2012, at 05:00 P.M. Eastern Time (04:00 P.M. Mexico City Time). To participate in the conference call, please dial: Domestic U.S.: 866-700-7477 or International: 617-213-8840. We invite investors to listen to the live audiocast of the conference call on the Company’s website, www.coca-colafemsa.com

 

If you are unable to participate live, an instant replay of the conference call will be available through July 30, 2012. To listen to the replay, please dial: Domestic U.S.: 888-286-8010 or International: 617-801-6888. Pass code: 72332505.

 

v v v

 

Coca-Cola FEMSA, S.A.B. de C.V. produces and distributes Coca-Cola, Fanta, Sprite, Del Valle, and other trademark beverages of The Coca-Cola Company in Mexico (a substantial part of central Mexico, including Mexico City, as well as southeast and northeast Mexico), Guatemala (Guatemala City and surrounding areas), Nicaragua (nationwide), Costa Rica (nationwide), Panama (nationwide), Colombia (most of the country), Venezuela (nationwide), Brazil (greater São Paulo, Campiñas, Santos, the state of Mato Grosso do Sul, part of the state of Goias, and part of the state of Minas Gerais), and Argentina (Buenos Aires and surrounding areas), along with bottled water, juices, teas, isotonics, beer, and other beverages in some of these territories. The Company has 37 bottling facilities in Latin America and serves close to 1,800,000 retailers in the region.

 

v v v

 

This news release may contain forward-looking statements concerning Coca-Cola FEMSA’s future performance, which 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, which could materially impact the Company’s actual performance.

 

References herein to “US$” are to United States dollars. This news release contains translations of certain Mexican peso amounts into U.S. dollars for the convenience of the reader. These translations should not be construed as representations that Mexican peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.

 

v v v

 

(5 pages of tables to follow)

 

 

 

 

 

July 24, 2012Page 16
 

 

 

 

Consolidated Income Statement                                        
Expressed in millions of Mexican pesos(1)                                        
                                         
        2Q 12 % Rev   2Q 11 % Rev   Reported Δ%   Excluding M&A Effects
Δ%(5)		   YTD 12 % Rev   YTD 11 % Rev   Reported Δ%   Excluding M&A Effects
Δ%(5)
Volume (million unit cases) (2)   770.0     665.6     15.7%   -0.2%   1,473.1     1,270.5     15.9%   2.1%
Average price per unit case (2)   45.66     41.19     10.8%   16.8%   46.16     41.25     11.9%   17.2%
Net revenues   36,119     28,267     27.8%       69,934     54,140     29.2%    
Other operating revenues   176     121     45.5%       422     250     68.8%    
Total revenues   36,295 100%   28,388 100%   27.9%   16.5%   70,356 100%   54,390 100%   29.4%   19.5%
Cost of goods sold   19,593 54.0%   15,348 54.1%   27.7%       38,191 54.3%   29,481 54.2%   29.5%    
Gross profit   16,702 46.0%   13,040 45.9%   28.1%       32,165 45.7%   24,909 45.8%   29.1%    
Operating expenses   11,937 32.9%   8,632 30.4%   38.3%       23,083 32.8%   16,663 30.6%   38.5%    
Other operative expenses, net   51 0.1%   35 0.1%   45.7%        (11) 0.0%   39 0.1%   -128.2%    
Operating income (3)   4,714 13.0%   4,373 15.4%   7.8%   -0.5%   9,093 12.9%   8,207 15.1%   10.8%   4.1%
Other non operative expenses, net   469     59     694.9%       499     102     389.2%    
Interest expense   433     401     8.0%       920     743     23.8%    
Interest income   96     146     -34.2%       202     240     -15.8%    
Interest expense, net   337     255     32.2%       718     503     42.7%    
Foreign exchange (gain) loss   127     68     86.8%       (75)     81     -192.6%    
Gain on monetary position in Inflationary subsidiaries    (6)      (18)     -66.7%       (15)     (22)     -31.8%    
Market value gain on ineffective portion of                                        
derivative instruments   20     13     53.8%        (12)      (47)     -74.5%    
Comprehensive financing result   478     318     50.3%       616     515     19.6%    
Income before taxes   3,767     3,996     -5.7%       7,978     7,590     5.1%    
Income taxes   913     1,147     -20.4%       2,334     2,414     -3.3%    
Consolidated net income   2,854     2,849     0.2%       5,644     5,176     9.0%    
Net controlling interest income   2,713 7.5%   2,749 9.7%   -1.3%       5,393 7.7%   4,958 9.1%   8.8%    
Net non-controlling interest income   141     100     41.0%       251     218     15.1%    
Operating income (3)   4,714 13.0%   4,373 15.4%   7.8%   -0.5%   9,093 12.9%   8,207 15.1%   10.8%   4.1%
Depreciation   1,230     904     36.1%       2,444     1,755     39.3%    
Amortization and other operative non-cash charges   365     107     241.1%       532     182     192.3%    
Operative cash flow (3)(4)   6,309 17.4%   5,384 19.0%   17.2%   7.0%   12,069 17.2%   10,144 18.7%   19.0%   10.4%

 

(1)   Except volume and average price per unit case figures.
(2)   Sales volume and average price per unit case exclude beer results
(3)   The Operating income and Operative cash flow lines are presented as non-gaap measures for the convenience of the reader.
(4)   Operative cash flow = Operating Income + depreciation, amortization & other operative non-cash charges.
       As of October 2011, we integrated Grupo Tampico in the operations of Mexico.
       As of December 2011, we integrated Grupo CIMSA in the operations of Mexico.
       As of May 2012, we integrated Grupo Fomento Queretano in the operations of Mexico.

(5)   Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability. 

 

 

 

July 24, 2012Page 17
 

  

 

 

Consolidated Balance Sheet
Expressed in millions of Mexican pesos.
         
Assets   Jun 12   Dec 11
Current Assets        
Cash, cash equivalents and marketable securities Ps. 9,192 Ps. 12,173
Total accounts receivable   6,935   8,631
Inventories   7,803   7,549
Other current assets   5,004   3,685
Total current assets   28,934   32,038
Property, plant and equipment        
Property, plant and equipment   68,550   64,514
Accumulated depreciation         (29,327)         (26,703)
Total property, plant and equipment, net   39,223   37,811
Other non-current assets   76,447   70,467
Total Assets Ps. 144,604 Ps. 140,316
         
         
Liabilities and Equity   Jun 12   Dec 11
Current Liabilities        
Short-term bank loans and notes Ps. 1,869 Ps. 5,541
Suppliers   11,605   11,852
Other current liabilities   8,789   7,697
Total Current Liabilities   22,263   25,090
Long-term bank loans   19,320   16,976
Other long-term liabilities   5,147   5,354
Total Liabilities   46,730   47,420
Equity        
Non-controlling interest   2,795   3,053
Total controlling interest   95,079   89,843
Total equity   97,874   92,896
Liabilities and Equity Ps. 144,604 Ps. 140,316

 

 

 

 

July 24, 2012Page 18
 

 

 

 

Mexico & Central America Division                                        
Expressed in millions of Mexican pesos(1)                                        
                                             
        2Q 12 % Rev   2Q 11 % Rev   Reported Δ%   Excluding M&A Effects
Δ%(4)		   YTD 12 % Rev   YTD 11 % Rev   Reported Δ%   Excluding M&A Effects
Δ%(4)
Volume (million unit cases)   504.3     402.2     25.4%   -1.0%   916.8     733.9     24.9%   1.0%
Average price per unit case   34.72     33.55     3.5%   7.1%   34.77     33.51     3.8%   7.1%
Net revenues   17,507     13,494     29.7%       31,873     24,591     29.6%    
Other operating revenues   106     38     178.9%       213     59     261.0%    
Total revenues   17,613 100.0%   13,532 100.0%   30.2%   6.2%   32,086 100.0%   24,650 100.0%   30.2%   8.5%
Cost of goods sold   9,254 52.5%   6,865 50.7%   34.8%       16,934 52.8%   12,662 51.4%   33.7%    
Gross profit   8,359 47.5%   6,667 49.3%   25.4%       15,152 47.2%   11,988 48.6%   26.4%    
Operating expenses   5,657 32.1%   4,106 30.3%   37.8%       10,578 33.0%   7,764 31.5%   36.2%    
Other operative expenses, net   46 0.3%   23 0.2%   100.0%       37 0.1%   14 0.1%   164.3%    
Operating income (2)   2,656 15.1%   2,538 18.8%   4.6%   -9.6%   4,537 14.1%   4,210 17.1%   7.8%   -4.9%
Depreciation, amortization & other operative non-cash charges   851 4.8%   499 3.7%   70.5%       1,487 4.6%   941 3.8%   58.0%    
Operative cash flow (2)(3)   3,507 19.9%   3,037 22.4%   15.5%   -2.5%   6,024 18.8%   5,151 20.9%   16.9%   0.5%

 

(1)   Except volume and average price per unit case figures.
(2)   The Operating income and Operative cash flow lines are presented as non-gaap measures for the convenience of the reader.
(3)   Operative cash flow = Operating Income + Depreciation, amortization & other operative non-cash charges.
       As of October 2011, we integrated Grupo Tampico in the operations of Mexico.
       As of December 2011, we integrated Grupo CIMSA in the operations of Mexico.
       As of May 2012, we integrated Grupo Fomento Queretano in the operations of Mexico.

(4)   Excluding M&A Effects means, with respect to a year-over-year comparison, the increase in a given measure excluding the effects of mergers, acquisitions and divestitures. We believe this measure allows us to provide investors and other market participants with a better representation of the performance of our business. In preparing this measure, management has used its best judgment, estimates and assumptions in order to maintain comparability. 

 

 

 

South America Division                                      
Expressed in millions of Mexican pesos(1)                                    
                                         
        2Q 12 % Rev   2Q 11 % Rev   Reported Δ%       YTD 12 % Rev   YTD 11 % Rev   Reported Δ%
Volume (million unit cases) (2)     265.7     263.4     0.9%       556.3     536.6     3.7%
Average price per unit case (2)     66.43     52.86     25.7%       64.93     51.85     25.2%
Net revenues     18,612     14,773     26.0%       38,061     29,549     28.8%
Other operating revenues     70     83     -15.7%       209     191     9.4%
Total revenues     18,682 100.0%   14,856 100.0%   25.8%       38,270 100.0%   29,740 100.0%   28.7%
Cost of goods sold     10,339 55.3%   8,483 57.1%   21.9%       21,257 55.5%   16,819 56.6%   26.4%
Gross profit     8,343 44.7%   6,373 42.9%   30.9%       17,013 44.5%   12,921 43.4%   31.7%
Operating expenses     6,280 33.6%   4,526 30.5%   38.8%       12,505 32.7%   8,899 29.9%   40.5%
Other operative expenses, net     5 0.0%   12 0.1%   -58.3%        (48) -0.1%   25 0.1%   -292.0%
Operating income (3)     2,058 11.0%   1,835 12.4%   12.2%       4,556 11.9%   3,997 13.4%   14.0%
Depreciation, amortization & other operative non-cash charges   744 4.0%   512 3.4%   45.3%       1,489 3.9%   996 3.3%   49.5%
Operative cash flow (3)(4)     2,802 15.0%   2,347 15.8%   19.4%       6,045 15.8%   4,993 16.8%   21.1%

 

(1) Except volume and average price per unit case figures.
(2) Sales volume and average price per unit case exclude beer results
(3) The Operating income and Operative cash flow lines are presented as non-gaap measures for the convenience of the reader.
(4) Operative cash flow = Operating Income + depreciation, amortization & other operative non-cash charges.

 

 

 

July 24, 2012Page 19
 

 

 

 

SELECTED INFORMATION
 
For the three months ended June 30, 2012 and 2011
 
Expressed in millions of Mexican pesos.

 

          2Q 12           2Q 11
  Capex       1,968.6   Capex       1,813.7
  Depreciation       1,230.0   Depreciation       904.0
  Amortization & Other non-cash charges 365.0   Amortization & Other non-cash charges 107.0

 

VOLUME
Expressed in million unit cases

 

  2Q 12   2Q 11
  Sparkling Water (1) Bulk
Water (2)		 Still Total   Sparkling Water (1) Bulk
Water (2)		 Still Total
Mexico 330.8 25.2 86.6 24.0 466.6   264.5 21.0 61.7 18.1 365.3
Central America 32.1 1.9 0.1 3.6 37.7   31.7 1.7 0.1 3.4 36.9
Mexico y Central America 362.9 27.1 86.7 27.6 504.3   296.2 22.7 61.8 21.5 402.2
Colombia 44.9 5.1 6.5 4.0 60.5   47.8 5.4 7.0 4.2 64.4
Venezuela 43.1 2.2 0.5 3.4 49.2   42.4 2.0 0.5 1.2 46.1
Brazil 97.7 5.3 0.6 5.6 109.2   97.5 4.6 0.5 5.0 107.6
Argentina 42.1 2.6 0.2 1.9 46.8   40.8 2.4 0.2 1.9 45.3
Sudamerica 227.8 15.2 7.8 14.9 265.7   228.5 14.4 8.2 12.3 263.4
Total 590.7 42.3 94.5 42.5 770.0   524.7 37.1 70.0 33.8 665.6

 

(1) Excludes water presentations larger than 5.0 Lt ; includes flavored water
(2) Bulk Water = Still bottled water in 5.0, 19.0 and 20.0 - liter packaging presentations; includes flavored water

 

 

 

Volume of Mexico, the Mexico & Central America division, and Consolidated for the second quarter 2012 results includes Grupo Tampico´s, Grupo CIMSA’s and Grupo Fomento Queretano’s results, accounting for 106.0 million unit cases, of which 61.4% is Sparkling Beverages, 12.3% is Water, 21.8% is Bulk Water and 4.5% is Still Beverages.

 

SELECTED INFORMATION
 
For the six months ended June 30, 2012 and 2011
 
Expressed in millions of Mexican pesos.

 

          YTD 12           YTD 11
  Capex       3,243.3   Capex       2,446.5
  Depreciation       2,444.0   Depreciation       1,755.0
  Amortization & Other non-cash charges 532.0   Amortization & Other non-cash charges 182.0

 

VOLUME
Expressed in million unit cases

 

  YTD 12   YTD 11
  Sparkling Water (1) Bulk
Water (2)		 Still Total   Sparkling Water (1) Bulk
Water (2)		 Still Total
Mexico 599.6 44.8 153.7 44.0 842.1   482.4 35.4 110.8 34.4 663.0
Central America 63.6 3.9 0.2 7.0 74.7   60.5 3.8 0.2 6.4 70.9
Mexico y Central America 663.2 48.7 153.9 51.0 916.8   542.9 39.2 111.0 40.8 733.9
Colombia 89.5 10.2 13.3 8.0 121.0   91.0 10.4 13.8 8.2 123.4
Venezuela 87.0 4.1 0.9 6.1 98.1   78.0 3.7 1.0 1.9 84.6
Brazil 205.9 12.2 1.5 11.5 231.1   207.0 11.1 1.3 10.4 229.8
Argentina 94.9 6.4 0.4 4.4 106.1   89.0 5.7 0.4 3.7 98.8
Sudamerica 477.3 32.9 16.1 30.0 556.3   465.0 30.9 16.5 24.2 536.6
Total 1,140.5 81.6 170.0 81.0 1,473.1   1,007.9 70.1 127.5 65.0 1,270.5

 

(1) Excludes water presentations larger than 5.0 Lt ; includes flavored water
(2) Bulk Water = Still bottled water in 5.0, 19.0 and 20.0 - liter packaging presentations; includes flavored water

 

 

 

Volume of Mexico, the Mexico & Central America division, and Consolidated for the first half of 2012 results includes Grupo Tampico´s, Grupo CIMSA’s and Grupo Fomento Queretano’s results, accounting for 175.8 million unit cases, of which 61.8% is Sparkling Beverages, 9.7% is Water, 24.0% is Bulk Water and 4.5% is Still Beverages.

 

 

 

July 24, 2012Page 20
 

 

 

  

June 2012
Macroeconomic Information

 

    Inflation (1)
    LTM 2Q 2012   YTD
           
Mexico   4.34% -0.17%   0.80%
Colombia   3.19% 0.53%   2.00%
Venezuela   21.33% 3.82%   7.49%
Brazil   4.92% 1.08%   2.32%
Argentina   9.90% 2.38%   5.06%
           
(1) Source: inflation is published by the Central Bank of each country.

 

 

 

Average Exchange Rates for each Period

 

    Quarterly Exchange Rate (local currency per USD)   YTD Exchange Rate (local currency per USD)
    2Q 12   2Q 11 Δ%   YTD 12 YTD 11 Δ%
                   
Mexico   13.5134   11.7364 15.1%   13.2649 11.9098 11.4%
Guatemala   7.7903   7.6891 1.3%   7.7828 7.7598 0.3%
Nicaragua   23.4003   22.2841 5.0%   23.2592 22.1501 5.0%
Costa Rica   508.9305   508.2812 0.1%   512.1133 508.3342 0.7%
Panama   1.0000   1.0000 0.0%   1.0000 1.0000 0.0%
Colombia   1,786.9930   1,797.8340 -0.6%   1,793.8324 1,837.4608 -2.4%
Venezuela   4.3000   4.3000 0.0%   4.3000 4.3000 0.0%
Brazil   1.9633   1.5956 23.0%   1.8656 1.6315 14.3%
Argentina   4.4487   4.0818 9.0%   4.3949 4.0477 8.6%

 

 

 

End of Period Exchange Rates

 

    Exchange Rate (local currency per USD)
    Jun 12 Jun 11   Δ%
           
Mexico   13.6530 11.8389   15.3%
Guatemala   7.8461 7.7702   1.0%
Nicaragua   23.5409 22.4184   5.0%
Costa Rica   503.8500 509.5700   -1.1%
Panama   1.0000 1.0000   0.0%
Colombia   1,784.6000 1,780.1600   0.2%
Venezuela   4.3000 4.3000   0.0%
Brazil   2.0213 1.5611   29.5%
Argentina   4.5270 4.1100   10.1%

 

 

 

 

 

 

July 24, 2012Page 21