COCA COLA FEMSA SAB DE CV 6-K Analysis & Summary – 2/21/2025

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Coca Cola Femsa S.A.B. de C.V.

6-K

Earnings Release (Preliminary), Guidance Update

Filing date:

02/21/2025

TLDR:

Coca-Cola FEMSA announces its fourth quarter and full year 2024 results, highlighting volume and revenue growth, as well as advancements in their digital platform.

ELI5:

Coca-Cola FEMSA, the biggest Coca-Cola bottler, had a good quarter with more sales and profits. They’re using new online tools to help their business, but changes in currency value and some bad weather made things a bit complicated.

Accession #:

0001292814-25-000504

Published on

March 16, 2025

Analyst Summary

Volume Growth: 2.2% (Q4 2024) and 4.4% (FY 2024)
Revenue Growth: 14.3% (Q4 2024) and 14.2% (FY 2024)
Operating Income Growth: 25.0% (Q4 2024) and 17.4% (FY 2024)
Net Income Growth: 35.1% (Q4 2024) and 21.5% (FY 2024)
Gross Margin (4Q24): 47.3%
Operating Margin (4Q24): 16.0%
Net Profit Margin (4Q24): 9.6%
EPS (4Q24): Ps. 0.43
Debt-to-Equity Ratio (Dec-24): 1.05
Debt-to-Assets Ratio (Dec-24): 0.51
Interest Coverage Ratio (FY24): 11.86
Revenue Growth (FY24): 14.2%
Net Income Growth (FY24): 21.5%
EPS Growth (FY24): 25.5%
Adjusted EBITDA for FY24 was Ps. 56,205 million, a 21.1% increase compared to FY23.
Reached more than 1.3 million active users in the Juntos+ B2B platform and more than 1.1 million in the Premia Juntos+ loyalty program.

Opportunities and Risks

Currency Fluctuations: Significant impact on reported results due to operations in countries with volatile currencies.
Natural Disasters: Hurricanes and flooding can disrupt operations and lead to asset write-offs.
Increased Debt in Argentina: Increase in debt in Argentina could pose a risk due to the country’s economic instability.
Digital Transformation: The Juntos+ platform provides opportunities for increased customer engagement and sales.
Market Expansion: Growth in key markets like Brazil and Mexico indicates potential for further expansion.
Sustainability Initiatives: Commitment to sustainability can enhance brand image and attract environmentally conscious consumers.

Potential Implications

Company Performance

Monitor currency risks and implement hedging strategies to mitigate their impact.
Continue to invest in digital initiatives to drive customer engagement and sales.
Assess the long-term impact of natural disasters on operations and develop contingency plans.
Further analyze the debt situation in Argentina and its potential impact on the company’s financial stability.

Coca-Cola FEMSA (KOF) Q4 2024 Earnings Report Analysis

Executive Summary

Coca-Cola FEMSA (KOF) reported strong Q4 2024 results, demonstrating growth in volume, revenue, operating income, and net income. The company’s digital initiatives, particularly the Juntos+ B2B platform, are gaining traction. While currency fluctuations and specific regional challenges (hurricanes, flooding) impacted results, KOF’s overall performance indicates a positive trajectory. A “Hold” recommendation is appropriate, pending further assessment of long-term sustainability of growth and mitigation of currency risks.

Company Overview

Coca-Cola FEMSA, S.A.B. de C.V. (KOF) is the largest Coca-Cola franchise bottler in the world by sales volume. It operates in Mexico, Brazil, Guatemala, Colombia, Argentina, Costa Rica, Nicaragua, Panama, Uruguay, and Venezuela. The company produces and distributes Coca-Cola trademark beverages.

Detailed Analysis

Financial Performance

Key Highlights:

Volume Growth: 2.2% (Q4 2024) and 4.4% (FY 2024)
Revenue Growth: 14.3% (Q4 2024) and 14.2% (FY 2024)
Operating Income Growth: 25.0% (Q4 2024) and 17.4% (FY 2024)
Net Income Growth: 35.1% (Q4 2024) and 21.5% (FY 2024)

Revenue Analysis:

Revenue growth was driven by volume increases, revenue management initiatives, and favorable mix effects. Excluding currency translation effects, revenue growth remained strong.

Profitability Analysis:

Gross profit and operating income margins expanded, driven by top-line growth, favorable mix effects, and easing sweetener and PET costs. However, higher fixed costs and currency depreciation partially offset these gains.

Key Ratios:

Ratio	Q4 2024	FY 2024
Gross Margin	47.3%	46.0%
Operating Margin	16.0%	14.3%
Net Debt / Adj. EBITDA	0.68	0.81
Adj. EBITDA / Interest Expense, Net	12.51	11.86
Capitalization (Total Debt / (Total Debt + Shareholders’ Equity))	33.3%	32.8%

Regional Performance:

Mexico & Central America: Revenue increased by 10.4% (Q4 2024), driven by revenue management initiatives. Operating income increased significantly.
South America: Revenue increased by 19.4% (Q4 2024), driven by volume growth and revenue management. Operating income also showed strong growth.

Management Discussion and Analysis (MD&A)

Key Insights:

Management highlights the company’s transformation and growth momentum.
Focus on digital initiatives, particularly the Juntos+ B2B platform, with significant user engagement.
Investment in CAPEX to expand production and distribution capacity.
Optimism about future opportunities in their markets.

Red Flags:

The MD&A mentions one-time net expenses related to asset write-offs and debris removal due to hurricanes and flooding. While insurance claims were recognized, these events highlight potential risks related to natural disasters.
Currency translation effects significantly impact reported results. The company operates in countries with volatile currencies, which can create uncertainty.

Uncommon Metrics:

Juntos+ Active Users: Reaching 1.3 million active users indicates successful digital transformation.
Water Efficiency Rate: Achieving a water efficiency rate of 1.36 liters of water per liter of beverage produced demonstrates commitment to sustainability.

Risk and Opportunity Assessment

Risks:

Currency Fluctuations: Significant impact on reported results due to operations in countries with volatile currencies.
Natural Disasters: Hurricanes and flooding can disrupt operations and lead to asset write-offs.
Increased Debt in Argentina: Increase in debt in Argentina could pose a risk due to the country’s economic instability.

Opportunities:

Digital Transformation: The Juntos+ platform provides opportunities for increased customer engagement and sales.
Market Expansion: Growth in key markets like Brazil and Mexico indicates potential for further expansion.
Sustainability Initiatives: Commitment to sustainability can enhance brand image and attract environmentally conscious consumers.

Conclusion and Actionable Insights

Coca-Cola FEMSA delivered strong Q4 2024 results, driven by volume growth, revenue management, and digital initiatives. However, currency fluctuations and regional challenges pose ongoing risks. The company’s focus on digital transformation and sustainability is encouraging.

Overall Assessment: Hold

Recommendations:

Monitor currency risks and implement hedging strategies to mitigate their impact.
Continue to invest in digital initiatives to drive customer engagement and sales.
Assess the long-term impact of natural disasters on operations and develop contingency plans.
Further analyze the debt situation in Argentina and its potential impact on the company’s financial stability.

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin (4Q24): 47.3%
- Calculation: Gross Profit / Total Revenues = 35,695 / 75,528 = 47.3%
- Trend: Increased from 46.1% in 4Q23. Percentage change: 2.6%
- Industry: The beverage industry typically sees gross profit margins ranging from 40% to 60%. Coca-Cola FEMSA’s margin is within this range.
Gross Profit Margin (FY24): 46.0%
- Calculation: Gross Profit / Total Revenues = 128,736 / 279,793 = 46.0%
- Trend: Increased from 45.2% in FY23. Percentage change: 1.8%
- Industry: The beverage industry typically sees gross profit margins ranging from 40% to 60%. Coca-Cola FEMSA’s margin is within this range.
Operating Profit Margin (4Q24): 16.0%
- Calculation: Operating Income / Total Revenues = 12,092 / 75,528 = 16.0%
- Trend: Increased from 14.6% in 4Q23. Percentage change: 9.6%
- Industry: A good operating margin for the beverage industry is generally between 15% and 20%. Coca-Cola FEMSA is within this range.
Operating Profit Margin (FY24): 14.3%
- Calculation: Operating Income / Total Revenues = 40,141 / 279,793 = 14.3%
- Trend: Increased from 13.9% in FY23. Percentage change: 2.9%
- Industry: A good operating margin for the beverage industry is generally between 15% and 20%. Coca-Cola FEMSA is slightly below this range.
Net Profit Margin (4Q24): 9.6%
- Calculation: Net Income Attributable to Equity Holders / Total Revenues = 7,286 / 75,528 = 9.6%
- Trend: Increased from 8.2% in 4Q23. Percentage change: 17.1%
- Industry: The beverage industry typically sees net profit margins ranging from 5% to 15%. Coca-Cola FEMSA is within this range.
Net Profit Margin (FY24): 8.5%
- Calculation: Net Income Attributable to Equity Holders / Total Revenues = 23,729 / 279,793 = 8.5%
- Trend: Increased from 8.0% in FY23. Percentage change: 6.3%
- Industry: The beverage industry typically sees net profit margins ranging from 5% to 15%. Coca-Cola FEMSA is within this range.
EPS (4Q24): Ps. 0.43
- Source: Provided in the highlights.
EPS (FY24): Ps. 1.41
- Source: Provided in the highlights.

Liquidity

Insufficient data is provided to calculate liquidity ratios.

Solvency/Leverage

Debt-to-Equity Ratio (Dec-24): 1.05
- Calculation: Total Liabilities / Total Equity = 157,445 / 150,542 = 1.05
- Trend: Increased from 1.05 in Dec-23. Percentage change: 0%
- Industry: The beverage industry typically sees debt-to-equity ratios ranging from 0.5 to 1.5. Coca-Cola FEMSA is within this range.
Debt-to-Assets Ratio (Dec-24): 0.51
- Calculation: Total Liabilities / Total Assets = 157,445 / 307,986 = 0.51
- Trend: Increased from 0.51 in Dec-23. Percentage change: 0%
- Industry: The beverage industry typically sees debt-to-assets ratios ranging from 0.3 to 0.6. Coca-Cola FEMSA is within this range.
Interest Coverage Ratio (FY24): 11.86
- Source: Provided in the financial ratios section.
Interest Coverage Ratio (4Q24): 12.51
- Source: Provided in the financial ratios section.

Activity/Efficiency

Insufficient data is provided to calculate activity/efficiency ratios.

Valuation

To calculate valuation ratios, we need the current market capitalization and book value per share. The market capitalization can be derived from the stock price and outstanding shares. The book value per share can be derived from the total equity and outstanding shares.

Shares Outstanding: 16,806.7 million
Stock Price: $8.75
Market Cap: 16,806.7 million * $8.75 = $147,058.625 million
Market Cap in Pesos: $147,058.625 million * 20.27 (Dec-24 MXN/USD) = 2,980,873.87 million MXN
Price-to-Earnings Ratio (P/E):
- Calculation: Market Cap / Net Income = 2,980,873.87 / 23,729 = 125.62
- Industry: The beverage industry typically sees P/E ratios ranging from 20 to 30. Coca-Cola FEMSA is significantly above this range.
Price-to-Book Ratio (P/B):
- Calculation: Market Cap / Total Equity = 2,980,873.87 / 150,542 = 19.80
- Industry: The beverage industry typically sees P/B ratios ranging from 3 to 5. Coca-Cola FEMSA is significantly above this range.
Price-to-Sales Ratio (P/S):
- Calculation: Market Cap / Total Revenues = 2,980,873.87 / 279,793 = 10.65
- Industry: The beverage industry typically sees P/S ratios ranging from 1 to 3. Coca-Cola FEMSA is significantly above this range.
Enterprise Value to EBITDA (EV/EBITDA):
- Calculation: (Market Cap + Total Debt – Cash) / EBITDA = (2,980,873.87 + (70,383 + 3,314) – 32,779) / 56,205 = 54.45
- Industry: The beverage industry typically sees EV/EBITDA ratios ranging from 10 to 15. Coca-Cola FEMSA is significantly above this range.

Growth Rates

Revenue Growth (FY24): 14.2%
- Calculation: (279,793 – 245,088) / 245,088 = 14.2%
Net Income Growth (FY24): 21.5%
- Calculation: (23,729 – 19,536) / 19,536 = 21.5%
EPS Growth (FY24): 25.5%
- Calculation: (1.41 – 1.125) / 1.125 = 25.5%
- Note: 1.125 is calculated by dividing the 2023 net income attributable to equity holders of the company (19,536) by the shares outstanding (16,806.7)

Other Relevant Metrics

Adjusted EBITDA: Coca-Cola FEMSA uses Adjusted EBITDA as a non-GAAP measure, calculated as operating income plus depreciation, amortization, and other operating non-cash charges. This metric is used to provide a clearer picture of the company’s operating profitability by excluding non-cash expenses. Adjusted EBITDA for FY24 was Ps. 56,205 million, a 21.1% increase compared to FY23.
Volume Growth: The company highlights volume growth, which increased by 2.2% in 4Q24 and 4.4% for the full year. This indicates increased sales and market penetration.
Active Users in Juntos+ B2B Platform and Premia Juntos+ Loyalty Program: The company reports reaching more than 1.3 million active users in the Juntos+ B2B platform and more than 1.1 million in the Premia Juntos+ loyalty program. This indicates a strong focus on customer engagement and digital transformation.

Commentary

Coca-Cola FEMSA demonstrates strong financial performance with significant revenue and profit growth in both the fourth quarter and full year 2024. The company’s profitability margins have improved, driven by effective cost management and pricing strategies. A notable increase in operating income and net income reflects enhanced operational efficiency. While valuation ratios are high, the company’s growth in revenue, net income, and EPS suggests a positive trajectory, supported by strategic initiatives like digital platform expansion and sustainability efforts.