Coca Cola Femsa S.A.B. de C.V. (NYSE:KOF) Q3 2019 Earnings Conference Call - Final Transcript

Oct 25, 2019 • 09:30 am ET


Coca Cola Femsa S.A.B. de C.V. (NYSE:KOF) Q3 2019 Earnings Conference Call - Final Transcript


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Good morning, everyone. And welcome to the Cola-Cola FEMSA's Third Quarter 2019 Conference Call. As a reminder, today's conference is being recorded and all participants are in a listen-only mode. At the request of the Company, we will open the conference up for questions-and-answers after the presentation.

During this conference call, management may discuss certain forward-looking statements concerning Coca-Cola FEMSA's future performance and should be considered as good-faith estimates made by the Company. 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 can materially impact the Company's actual performance.

At this time, I would now like to turn the conference over to Mr. John Santa Maria, Coca-Cola FEMSA's Chief Executive Officer. Please go ahead, sir.

John Santa Maria

Thank you. Good morning, everyone. Thank you for joining us to discuss our third quarter results. Constantino Spas, our Chief Financial Officer; and Maria Dyla Castro, our Investor Relations Director, are also here with us today.

I am encouraged by the positive operating performance delivered for the third quarter. Across our territories, we continue to successfully deploy strategies across diverse fronts to capitalize on the potential of our industry. Our Mexico and Central America division continue to deliver solid top- and bottom-line growth. While our ability to drive cost and expense efficiencies, coupled with a more stable raw material environment, resulted in margin expansion for the division. In South America, we continue to focus on affordability. Strong execution at the point of sale and cost and expense controls to navigate dynamic environments. I underscore the impressive turnaround of our Brazilian operation, which continues to post solid volume performance as it builds on two years of continuous growth. Importantly, this growth is leading the market -- is leading to market share gains in all key categories.

As disclosed in our earnings release issued earlier this morning, Coca-Cola FEMSA has been entitled to reclaim tax payments made in prior years in Brazil, following a favorable decision from the Brazilian tax authorities. This is having extraordinary effects on our third quarter results. I will refer to the tax-related and other extraordinary effects, as I summarize our results for the quarter.

Our top-line grew 10.3%. This growth was driven mainly by volume growth in Brazil, Central America, stable volume performance in Mexico, and improving price mix trends across our core markets. On the other hand, our top-line performance was affected by unfavorable translation effects for most of our operating currencies in South America as translated into Mexican pesos and the challenging macro environment in Argentina. By normalizing our total revenues by approximately MXN1.1 billion of extraordinaries -- extraordinary other operating revenues, our reported top-line would have increased 7.8%.

Our operating income increased 21.4%. Our operating income growth was driven by the positive momentum of our top-line results, a more stable sweetener environment, declining PET costs, operating expenses and -- operating expense efficiencies and extraordinary effects of taxes reclaimed in Brazil. All these effects were partially offset