Coca-Cola FEMSA (KOF) Shares Jump After Strong Second-Quarter Results

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Companies · Mexico

The world’s biggest Coca-Cola bottler delivered a quarter strong enough to send its shares climbing. Mexico’s Coca-Cola FEMSA posted higher sales, fatter margins and a jump in profit.

Coca-Cola FEMSA is the world’s largest Coca-Cola bottler by volume. (Photo: Wikimedia Commons)

A strong quarter

Coca-Cola FEMSA, the Mexican company that is the world’s largest Coca-Cola bottler by volume, reported robust second-quarter results. Revenue rose 4.7% to 76.3 billion pesos, or about US$4.1 billion, and climbed 6.6% on a currency-neutral basis that strips out exchange-rate swings. Sales volume increased 3.5% over the same period a year earlier.

The company’s profitability improved even faster than its top line. Gross profit rose 8.8% to 35.9 billion pesos, roughly US$2.0 billion, as gross margin widened by 180 basis points to 47.1%.

Profit and margins climb

Operating income grew 9.1%, and majority net income increased 16.9% from a year earlier. Earnings came in at 0.63 pesos per share, with the company also raising its dividend.

Margin gains were a central theme of the results. Lower input costs and disciplined pricing helped the bottler convert steady volume growth into stronger profits.

What Fomento Económico Mexicano does. Fomento Económico Mexicano, S.A.B. de C.V., through its subsidiaries, operates as a franchise bottler of Coca-Cola trademark beverages worldwide. The company operates through Coca-Cola FEMSA, Proximity Americas Division, Proximity Europe Division, Health Division, Fuel Division, and Others segments. It produces, markets, and distributes Coca-Cola trademark beverages in Mexico, Guatemala, Nicaragua, Costa Rica,…

Latin America carries the load

The quarter was driven by record second-quarter volumes in Brazil, Colombia and Guatemala. Those markets more than offset weakness at home, underscoring the value of the company’s regional spread.

Coca-Cola FEMSA operates across much of Latin America, giving it exposure to fast-growing consumer markets. Diversification cushioned the impact of a difficult quarter in Mexico.

Headwinds at home

Mexico, the company’s home market, faced a softer consumer environment and the effect of a higher excise tax on sugary drinks. Those pressures held back volumes even as other markets accelerated.

Taxes on sweetened beverages have become a growing challenge for bottlers across the region. Managing pricing without losing shoppers is now a core test for the industry.

The market reaction

Investors rewarded the results, sending Coca-Cola FEMSA’s shares up about 6.5% to US$109.43. That pushed the stock close to its 52-week high near US$116.

The rally reflected confidence in the company’s margin trajectory and regional growth. A higher dividend added to the appeal for income-focused investors.

Why it matters

As the largest Coca-Cola bottler in the world, the company is a bellwether for consumer demand across Latin America. Its results offer a read on how households in Brazil, Mexico and the Andes are spending.

For investors, the quarter showed a business growing profits despite a mixed backdrop. The challenge ahead is sustaining momentum if Mexican consumption stays weak.

Frequently Asked Questions

What is Coca-Cola FEMSA (KOF)?

It is a Mexican company and the world’s largest Coca-Cola bottler by sales volume, operating across much of Latin America.

How strong were the second-quarter results?

Revenue rose 4.7% to 76.3 billion pesos (about US$4.1 billion), majority net income climbed 16.9%, and gross margin widened to 47.1%.

Why did the shares rise?

Investors welcomed the margin gains, regional volume growth and a higher dividend, sending the stock up about 6.5% toward its 52-week high.

Sources

• TipRanks
• Coca-Cola FEMSA 6-K (SEC)
• The Motley Fool — earnings call