Mexico's Coke Femsa's sales rise, profit drops on acquisitions

Reuters

MEXICO CITY, Feb 26 (Reuters) - A string of recent acquisitions helped to boost fourth-quarter sales volumes at Coca-Cola Femsa, Latin America's biggest Coke bottler, but the cost of financing the deals led to a 29 percent drop in earnings.

Shares of the joint venture of Coca-Cola Co and Mexican retailer Femsa fell nearly 4 percent after it reported results on Wednesday.

Without revenue from the newly acquired businesses, sales dipped because of weak consumer spending in Brazil and Mexico and poor weather, Chief Financial Officer Hector Trevino told analysts on a conference call.

To pare down debt, he said, the company will trim its investment this year to between $600 million and $700 million from roughly $800 million in 2013. Projects slated for this year include work on new plants to expand production in Colombia and Brazil.

The company reported a profit of 3.066 billion pesos ($234 million) for the quarter, down from 4.320 billion pesos a year earlier.

Financing expenses more than tripled to 1.9 billion pesos from 611 million pesos as net debt increased more than six times to 45.2 billion pesos.

Most of the debt increase was to fund acquisitions in Brazil, Coke Femsa said.

A decline in the value of the peso against the U.S. dollar also drove up financing costs, since about one-fifth of the company's debt is in dollars.

"We want to reduce our debt," Trevino said on the call, explaining it was important for the company to maintain its credit ratings so it could continue to place new debt easily.

Coke Femsa has been on a buying spree. Last year it acquired bottlers in Mexico, the Philippines and Brazil.

Coca-Cola Co has been selling some bottling operations in the United States. Trevino said Coke Femsa might be interested in such deals in the future, but its focus for now is in Latin America and the Philippines.

The recent acquisitions helped Coke Femsa report an 8.5 percent jump in revenue to 43.24 billion pesos and higher sales volumes for Coke, bottled water and juices.

But excluding the new revenue from the acquisitions in Brazil and Mexico, sales volumes slipped 1.1 percent.

Coke Femsa expects sales volumes in Mexico to drop between 5 and 7 percent this year as a result of a tax of 1 peso (8 cents) per liter on sugary drinks implemented last year.

The company has increased prices by 16 percent to include the tax and may raise them again in the middle of this year, Trevino said.

Shares of Coke Femsa were down 3.7 percent at 126.10 pesos in afternoon trading.

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