KOF Coca Cola FEMSA SAB De CV

RESULTS FINANCIAL SUMMARY

“2022 was a positive year for Coca-Cola FEMSA. In the face of an inflationary environment, our company was able to deliver its highest ever top-line, operating income, and operating cash flow levels. Notably, we were able to deliver double-digit top-line growth across our territories, reflecting our company’s ability to execute the right strategies locally, our revenue growth management initiatives, and effective point-of-sale execution. Simultaneously, we leveraged our enhanced cooperation framework with The Coca-Cola Company to increase investments in the business, advanced the rollout of our B2B omnichannel platform, and expand our multi-category strategy to explore new revenue streams in key territories.

Looking ahead, I am encouraged by the opportunities we see for our company. I am convinced that we have a talented team, clear rights-to-win, and positive momentum to enter a new chapter of growth and sustainable value creation for Coca-Cola FEMSA.”

RECENT DEVELOPMENTS

CONFERENCE CALL INFORMATION

CONSOLIDATED FOURTH QUARTER RESULTS

Volume increased 4.6% to 995.3 million unit cases, driven mainly by volume growth in Brazil, Mexico, Guatemala, Argentina, and Uruguay. This increase was partially offset by a slight volume decline in Colombia. On a comparable basis, our volume would have increased 3.6%.

Total revenues increased 14.9% to Ps. 61,209 million. This increase was driven mainly by our pricing initiatives to offset increases in raw material costs, favorable price-mix effects, and volume growth. These effects were partially offset by unfavorable currency translation effects of most of our operating currencies into Mexican Pesos. On a comparable basis, total revenues would have increased 18.9%.

Gross profit increased 12.9% to Ps. 27,068 million, and gross margin decreased 80 basis points to 44.2%. This gross margin decrease was driven by higher raw material costs, mainly PET and sweeteners. These effects were partially offset by our top-line growth, the appreciation of the Mexican Peso as applied to our U.S. dollar-denominated raw material costs, and favorable raw material hedging initiatives. On a comparable basis, gross profit would have increased 16.9%.

Operating income increased 15.9% to Ps. 9,013 million, and operating margin increased 10 basis points to 14.7%. This increase was driven mainly by our solid top-line performance, operational leverage, coupled with operating expense efficiencies across our operations. These effects were partially offset by increases in raw material costs. On a comparable basis, operating income would have increased 18.0%.

Comprehensive financing result recorded an expense of Ps. 1,092 million, compared to an expense of Ps. 748 million in the same period of 2021.

This increase was driven mainly by a foreign exchange loss of Ps. 281 million as compared to a gain of Ps. 79 million recorded during the same period of 2021, as our cash exposure in U.S. dollars was negatively impacted by the quarterly appreciation of the Mexican Peso.

In addition, we recorded higher interest expenses of Ps. 1,833 million as compared to Ps. 1,592 million recorded during the same period of 2021. This is a result of increases in interest rates.

Moreover, we recognized a lower gain in monetary position in inflationary subsidiaries of Ps. 128 million during the fourth quarter of 2022, as compared to a gain of Ps. 270 during the same period of the previous year.

Finally, this quarter we recognized a lower gain in the market value of financial instruments of Ps. 72 million, as compared to a gain of Ps. 131 million during the fourth quarter of 2021.

These effects were partially offset by higher interest income for Ps. 821 million as compared to a gain of Ps. 365 million recorded during the same period of 2021, related to an increase in interest rates.

Income tax as a percentage of income before taxes was 7.7% as compared to 14.1% during the same period of the previous year. This lower effective tax rate was mainly driven by deferred tax effects.

Net income attributable to equity holders of the company was Ps. 7,144 million as compared to Ps. 5,809 million during the same period of the previous year, driven mainly by solid operating results, coupled with a decline in the effective tax rate. Earnings per share¹ were Ps. 0.43 (Earnings per unit were Ps. 3.40 and per ADS were Ps. 34.0.).

CONSOLIDATED FULL YEAR RESULTS

Volume increased 8.6% to 3,755.2 million unit cases, driven mainly by volume growth across all of our territories, including double-digit increases in Brazil, Colombia, Argentina and Guatemala, coupled with solid performances in Mexico and Uruguay. On a comparable basis, excluding M&A, our volume would have increased 7.5%.

Total revenues increased 16.4% to Ps. 226,740 million. This increase was driven mainly by volume growth, our pricing initiatives to offset increases in raw material costs, and favorable price-mix effects. These factors were partially offset by a decline in beer revenues related to the transition of the beer portfolio in Brazil and unfavorable currency translation effects from most of our operating currencies into Mexican Pesos. On a comparable basis, excluding M&A and currency translation effects, total revenues would have increased 17.8%.

Gross profit increased 13.2% to Ps. 100,300 million, and gross margin decreased 130 basis points to 44.2%. This decrease in gross margin was driven mainly by (i) a tough comparison base due to the recognition of an extraordinary Ps. 1,083 million during the second quarter of 2021, related to credits on concentrate purchased from the Manaus Free Trade Zone in Brazil; and (ii) higher raw material costs, mainly PET and sweeteners. These effects were partially offset by top-line growth and favorable raw material hedging initiatives. On a comparable basis, gross profit would have increased 14.6%.

Operating income increased 12.5% to Ps. 30,838 million, and operating margin decreased 50 basis points to 13.6%. This operating margin decrease was driven mainly by higher raw material costs, coupled with a tough comparison base that included the recognition of non-recurring tax income of Ps. 620 million during the third quarter of 2021. These effects were partially offset by our solid top-line performance, coupled with operating expense efficiencies across our territories. On a comparable basis, operating income would have increased 11.6%.

Comprehensive financing result recorded an expense of Ps. 4,549 million, compared to an expense of Ps. 4,219 million in 2021.

This increase was driven mainly by a foreign exchange loss of Ps. 324 million as compared to a gain of Ps. 227 million recorded during the same period of 2021, as our cash exposure in U.S. dollars was negatively impacted by the appreciation of the Mexican Peso.

In addition, we recognized a loss in the market value of financial instruments of Ps. 672 million, as compared to a gain of Ps. 80 million during 2021.

Additionally, we recorded an increase in interest expense. During the year, interest expenses were Ps. 6,500 million, as compared to an expense of Ps. 6,192 million during 2021. This increase was mainly driven by increases in interest rates, partially offset by the tender offer completed during the third quarter of 2022.

Finally, we recognized a lower gain in monetary position in inflationary subsidiaries, recording Ps. 536 million during 2022, as compared to a gain of Ps. 734 million during the previous year.

These effects were partially offset by higher interest income, resulting in Ps. 2,411 million during 2022, as compared to a gain of Ps. 932 million recorded during 2021. This increase is related to an increase in interest rates.

Income tax as a percentage of income before taxes was 25.4% as compared to 28.9% during the same period of the previous year, mainly driven by deferred tax effects.

Net income attributable to equity holders of the company was Ps. 19,034 million as compared to Ps. 15,708 million during the same period of the previous year, an increase of 21.2%. This was driven mainly by operating income growth, coupled with a decline in our effective tax rate during the year. Earnings per share¹ were Ps. 1.13 (Earnings per unit were Ps. 9.06, and per ADS were Ps. 90.61.).

MEXICO & CENTRAL AMERICA DIVISION FOURTH QUARTER RESULTS

(Mexico, Guatemala, Costa Rica, Panama, and Nicaragua)

Volume increased 3.0% to 547.9 million unit cases, driven by volume growth across our territories in the division, including 11.0% growth in Guatemala and 2.3% growth in Mexico.

Total revenues increased 9.7% to Ps. 33,792 million, driven mainly by our pricing initiatives to offset increases in raw material costs, favorable price-mix effects, and volume growth in all our territories. These factors were partially offset by unfavorable currency translation effects into Mexican Pesos. On a comparable basis, total revenues would have increased 10.9%.

Gross profit increased 5.1% to Ps. 15,678 million, and gross margin contracted 200 basis points to 46.4%. This margin contraction was driven mainly by increases in raw material costs such as PET and sweeteners. These effects were partially offset by our favorable price-mix effects, coupled with the appreciation of the Mexican Peso as applied to our U.S. dollar-denominated raw material costs. On a comparable basis, gross profit would have increased 6.1%.

Operating income increased 2.6% to Ps. 5,212 million, and operating margin contracted 110 basis points to 15.4%. This margin contraction was driven mainly by higher raw material costs that were partially offset by a non-cash operating foreign exchange gain, resulting from the appreciation of the Mexican Peso. On a comparable basis, operating income would have increased 3.6%.

factors affecting the comparability of our financial and operating performance.

operating non-cash charges.

SOUTH AMERICA DIVISION FOURTH QUARTER RESULTS

(Brazil, Argentina, Colombia, and Uruguay)

Volume increased 6.6% to 447.4 million unit cases, driven mainly by the solid performance achieved in Brazil, Argentina, and Uruguay. Growth in these markets was partially offset by a slight volume decline in Colombia. On a comparable basis, excluding M&A, our volume for the division would have increased 4.4%.

Total revenues increased 22.0% to Ps. 27,417 million, driven mainly by our pricing initiatives to offset increases in raw material costs, favorable price-mix effects, and volume growth. These effects were partially offset by unfavorable currency translation effects of most of our operating currencies into Mexican pesos. On a comparable basis, total revenues would have increased 30.9%.

Gross profit increased 25.6% to Ps. 11,390 million, and gross margin expanded 120 basis points to 41.5%. This growth was driven mainly by favorable price-mix effects and volume growth. These effects were partially offset by increases in raw material costs such as PET and sweeteners. On a comparable basis, gross profit would have increased 36.1%.

Operating income increased 41.0% to Ps. 3,801 million, resulting in a margin expansion of 190 basis points to 13.9%. This increase was driven mainly by operating leverage resulting from our solid top-line performance in the division, coupled with operating expense efficiencies. On a comparable basis, operating income would have increased 46.1%.

factors affecting the comparability of our financial and operating performance.

DEFINITIONS

Volume is expressed in unit cases. Unit case refers to 192 ounces of finished beverage product (24 eight-ounce servings) and, when applied to soda fountains, refers to the volume of syrup, powders, and concentrate that is required to produce 192 ounces of finished beverage product.

Transactions refers to the number of single units (e.g., a can or a bottle) sold, regardless of their size or volume or whether they are sold individually or in multipacks, except for soda fountains, which represent multiple transactions based on a standard 12 oz. serving.

Operating income is a non-GAAP financial measure computed as “gross profit – operating expenses – other operating expenses, net + operative equity method (gain) loss in associates.”

Operating cash flow is a non-GAAP financial measure computed as “operating income + depreciation + amortization & other operating non-cash charges.”

Earnings per share are equal to “quarterly earnings / outstanding shares.” Earnings per share (EPS) for all periods are adjusted to give effect to the stock split resulting in 16,806,658,096 shares outstanding. For the convenience of the reader, as a KOFUBL Unit is comprised of 8 shares (3 Series B shares and 5 Series L shares), earnings per unit are equal to EPS multiplied by 8. Each ADS represents 10 KOFUBL Units.

COMPARABILITY

In an effort to provide our readers with a more useful representation of our company's underlying financial and operating performance, as of the first quarter 2020, we adjusted our methodology to calculate our comparable figures, no longer excluding hyperinflationary operations. Due to this change, our “comparable” term means, with respect to a year-over-year comparison, the change of a given measure excluding the effects of: (i) mergers, acquisitions, and divestitures; and (ii) translation effects resulting from exchange rate movements. In preparing this measure, management has used its best judgment, estimates, and assumptions in order to maintain comparability.

ABOUT THE COMPANY

Stock listing information: Mexican Stock Exchange, Ticker: KOFUBL | NYSE (ADS), Ticker: KOF | Ratio of KOFUBL to KOF = 10:1

Coca-Cola FEMSA files reports, including annual reports and other information with the U.S. Securities and Exchange Commission, or the “SEC,” and the Mexican Stock Exchange (Bolsa Mexicana de Valores, or the “BMV”) pursuant to the rules and regulations of the SEC (that apply to foreign private issuers) and of the BMV. Filings we make electronically with the SEC and the BMV are available to the public on the Internet at the SEC’s website at www.sec.gov, the BMV’s website at www.bmv.com.mx, and our website at www.coca-colafemsa.com.

Coca-Cola FEMSA, S.A.B. de C.V. is the largest Coca-Cola franchise bottler in the world by sales volume. The Company produces and distributes trademark beverages of The Coca-Cola Company, offering a wide portfolio of 131 brands to a population of more than 266 million. With over 80 thousand employees, the Company markets and sells approximately 3.5 billion unit cases through 2 million points of sale a year. Operating 49 manufacturing plants and 260 distribution centers, Coca-Cola FEMSA is committed to generating economic, social, and environmental value for all of its stakeholders across the value chain. The Company is a member of the Dow Jones Sustainability Emerging Markets Index, Dow Jones Sustainability MILA Pacific Alliance Index, FTSE4Good Emerging Index, and the Mexican Stock Exchange’s IPC and Social Responsibility and Sustainability Indices, among others. Its operations encompass franchise territories in Mexico, Brazil, Guatemala, Colombia, and Argentina, and, nationwide, in Costa Rica, Nicaragua, Panama, Uruguay, and Venezuela through its investment in KOF Venezuela. For further information, please visit www.coca-colafemsa.com.

ADDITIONAL INFORMATION

All of the financial information presented in this report was prepared under International Financial Reporting Standards (IFRS).

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.

(6 pages of tables to follow)

⁽¹⁾              Except volume and average price per unit case figures.

⁽²⁾              Please refer to page 14 for revenue breakdown.

⁽³⁾              Includes equity method in Jugos del Valle and Leão Alimentos, among others.

⁽⁴⁾              Includes equity method in PIASA, IEQSA, Beta San Miguel, IMER, and KSP Participacoes, among others.

⁽⁵⁾              The operating income and operating cash flow lines are presented as non-GAAP measures for the convenience of the reader.

⁽⁶⁾              Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

⁽⁷⁾              Please refer to page 9 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

⁽⁸⁾              For the Full year of 2022, total CAPEX effectively paid was Ps. 19,665 million.

⁽¹⁾              Except volume and average price per unit case figures.

⁽²⁾              Please refer to page 14 for revenue breakdown.

⁽³⁾              Includes equity method in Jugos del Valle, among others.

⁽⁴⁾              The operating income and operating cash flow lines are presented as non-GAAP measures for the convenience of the reader.

⁽⁵⁾              Operating cash flow = operating income + depreciation, amortization & other operating non-cash charges.

⁽⁶⁾              Please refer to page 9 for our definition of “comparable” and a description of the factors affecting the comparability of our financial and operating performance.

COCA-COLA FEMSA
CONSOLIDATED BALANCE SHEET
Millions of Pesos
Assets		Dec-22	Dec-21	% Var.		Liabilities & Equity		Dec-22	Dec-21	% Var.
Current Assets						Current Liabilities
Cash, cash equivalents and marketable securities						Short-term bank loans and notes payable		8,524	2,453	247%
		40,277	47,248	-15%		Suppliers		26,834	22,745	18%
Total accounts receivable		16,318	13,014	25%		Short-term leasing Liabilities		472	614
Inventories		11,888	11,960	-1%		Other current liabilities		22,129	20,409	8%
Other current assets		10,729	8,142	32%		Total current liabilities		57,959	46,221	25%
Total current assets		79,211	80,364	-1%		Non-Current Liabilities
Non-Current Assets						Long-term bank loans and notes payable		70,146	83,329	-16%
Property, plant and equipment		125,293	113,827	10%		Long Term Leasing Liabilities		1,663	891
Accumulated depreciation		(54,088)	(51,644)	5%		Other long-term liabilities		16,351	13,554	21%
Total property, plant and equipment, net		71,205	62,183	15%		Total liabilities		146,119	143,995	1%
Right of use assets		2,069	1,472	41%		Equity
Investment in shares		8,452	7,494	13%		Non-controlling interest		6,491	6,022	8%
Intangible assets and other assets		103,122	102,174	1%		Total controlling interest		125,384	121,550	3%
Other non-current assets		13,936	17,880	-22%		Total equity		131,876	127,572	3%
Total Assets		277,995	271,567	2%		Total Liabilities and Equity		277,995	271,567	2%
		December 30, 2022
Debt Mix		% Total Debt (1)	% Interest Rate Floating (1) (2)	Average Rate		Debt Maturity Profile
Currency
Mexican Pesos		62.0%	7.3%	8.3%
U.S. Dollars		17.4%	30.9%	4.3%
Colombian Pesos		1.4%	0.0%	7.0%
Brazilian Reals		18.0%	67.2%	12.4%
Uruguayan Pesos		1.2%	0.0%	6.3%
Total Debt		100%	23.2%	8.3%
(1) After giving effect to cross- currency swaps and financial leases.
(2) Calculated by weighting each year´s outstanding debt balance mix.
Financial Ratios		FY 22	FY 2021	Δ%
Net debt including effect of hedges (1)(3)		38,104	35,243	8.1%
Net debt including effect of hedges / Operating cash flow (1)(3)		0.89	0.91
Operating cash flow/ Interest expense, net (1)		10.34	7.39
Capitalization (2)		38.9%	40.7%
(1) Net debt = total debt - cash
(2) Total debt / (long-term debt + shareholders' equity)
(3)  After giving effect to cross-currency swaps.

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