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 MEXICO CITY, Oct. 28 /PRNewswire/ -- Fomento Economico Mexicao, S.A. de C.V., or FEMSA, (FEMSYP: PORTAL), Mexico's leading producer of beer and soft drinks, today announced results for the third quarter and nine months ended Sept. 30, 1993.
 Revenue for the third quarter of 1993 totaled NPs. 1,984 million, 5.7 percent greater in real terms than that reported for the same period in 1992. This increase can be attributed to a 3.8 percent growth in volume of beer sales and a 5.2 percent growth in volume of soft drink sales.
 Gross margin as a percent of sales continued its upward trend as a result of growth in sales and a cost of sales increase of only 0.6 percent. In real terms, the gross margin increased by 12.1 percent to 47.5 percent of sales during the third quarter of 1993, from 44.8 percent of sales during the same period in 1992.
 Operating expenses during the third quarter increased by 10.3 percent reflecting higher costs associated with the continued promotions to support the launch of new products and presentations in the beer and soft drink businesses. This increase was compensated by the growth in operating margin. As a result, operating income for the third quarter of 1993 increased 21.6 percent in real terms to NPs. 197 million, compared with NPs. 162 million reported during the same period in 1992.
 The combined effect of higher contracted interest rates and a lower rate of inflation led to a higher real interest rate for FEMSA during the third quarter of 1993 compared to a negative real rate during the same period in 1992. This significant increase in the integral cost of financing led to a lower net income during the third quarter compared to the same period in 1992.
 Comparable net income before extraordinary items reached NPs. 75 million during the third quarter of 1993.
 At the end of the third quarter, Impulsora de Mercados, S.A. de c.v., a wholly owned subsidiary of FEMSA, place 19 percent of the total capital stock of Coca-Cola FEMSA S.A. de C.V., simultaneously through a public offering in the United States, Europe and Mexico. Net proceeds from the sale totaled $177.4 million. Since the offering share price exceeded book value, the income generated through this transaction was treated as an extraordinary item. As a result, net income during the third quarter totaled NPs. 424 million, or NPs. 0.783 per share, based on 541,380,000 shares outstanding.
 Nine Month Results
 Consolidated revenue for the nine months ended Sept. 30, 1993, increased to NPs. 5,568 million, or 6.9 percent in real terms, compared with that reported during the same period in 1992.
 Gross margin for the nine months ended Sept. 30, 1993, increased 13.9 percent when compared with the same period in 1992, as a result of cost efficiencies in raw materials, production and freight costs, as well as the use of more modern equipment which has led to a greater efficiency in the production process.
 The improved margins more than offset the impact of the increase in operating costs on operating income. As a result, operating income increased by 13 percent to NPs. 582 million when compared with the same period of 1992.
 The integral cost of financing for the nine months ended Sept. 30, 1993, increased significantly when compared with the same period of 1992 as a result of an increase of 5 percentage points in the average real interest cost. An important part of this increase in the real cost was a consequence of the existence, in 1992, of an average debt of US$490 million related to the Bancomer transaction, which was contracted at a rate lower than average rates available at that time in the market. This reduced the average cost of FEMSA's liabilities in 1992. In addition, during the life of this loan the exchange rate remained constant leading to a negative real interest rate of 4.8 percent for this loan, or NPs. 79 million negative integral cost of financing.
 The most important effect of this line item was a significant impact on comparable net income to NPs. 280, or 23 percent less than that reported during the same period of 1992. Comparable net income per share during the period was NPs. 0.517 calculated on 541,380,000 shares outstanding.
 Consolidated net income for the 1992 period includes extraordinary income corresponding to the sale of the mineral water business during the month of April 1992, while the 1993 figure includes the income generated through the initial public offering of Coca-Cola FEMSA.
 Operating Highlights
 Sales of beer increased by 3.9 percent in the first nine months of 1993. Non-returnable presentations represented 23.1 percent of this volume, an increase of 1.7 percentage points when compared with the same period last year.
 Volume sales of the XX Lager brand can presentation continued to increase and grew by 39.6 percent when compared with the first nine months of 1992. This new presentation has been well accepted by consumers and currently represents 2.4 percent of beer industry sales.
 Tecate Light, has without a doubt, excelled among all the latest new products launched within the country, reaching gross sales of 477.9 hectoliters and maintaining a 1.6 percent market share. Only nine months after its launch, Tecate Light has established itself on a national level.
 During the first nine months of 1993, the Mexican beer industry experienced a 5 percent growth in exports. Exports of FEMSA products have increased by 10 percent, as a result of a 22 percent growth in the U.S. market, which represents more than 3.4 of FEMSA's total beer exports.
 Sales volume in the soft drink business grew 8.6 percent during the first nine months of 1993 compared with the same period in 1992, far exceeding the soft drink industry's growth of 5.2 percent. Sales share for colas increased by 4.3 percentage points to 57.2 percent in the Valley of Mexico and decreased by 1.4 percentage points to 70.1 percent in the Southeast during the first nine months of 1993, compared with the same period last year. Promotions continue in both franchises and new product introductions including the launch of the half liter Fanta presentation in the Valley of Mexico.
 Oxxo convenience stores continue their expansion program to open 99 new stores during the year, to achieve a total of 603 stores with a sales area of 66.3 thousand square meters.
 Recent Developments
 On June 21, 1993, a definitive agreement was signed with the Coca- Cola Company, from which FEMSA received US$195 million for a 30 percent stake in Coca-Cola Femsa, S.A. de C.V. (formerly Femsa Refrescos, S.A. de C.V.). As reported earlier, on Sept. 14, 1993, Coca-Cola FEMSA successfully completed an initial public offering of 19 percent of its total capital stock simultaneously in the European, U.S. and Mexican markets, raising a total of US$177.4 million.
 Revenue received from this transaction were used to pay down short- term debt. As a result, FEMSA's financial structure was strengthened significantly lowering the leverage ratio from 1.0 in December 1992 to 0.7 in September 1993 and improving the liquidity ratio from 1.07 to 1.53. This reduction of debt will favorably impact the integral cost of financing for following periods.
 FEMSA is the largest beverage and packaging company in Mexico, with export positions in the United States and Europe. Founded in 1890, FEMSA produces and distributes name brands of beer including Tecate, Dos XX, Carta Blanca, Bohemia and Superior, and soft drinks, including Coke, Diet Coke, Sprite and Fanta. FEMSA also operates an extensive chain of Oxxo convenience stores throughout Mexico.
 Consolidated Income Statement Non-audited
 Amounts in millions of constant new pesos as of Sept. 30, 1993
 Periods ended Sept. 30 Three Months Nine Months
 1993 1992 1993 1992
 Net sales $1,984 $1,876 $5,568 $5,210
 Cost of sales 1,041 1,035 2,976 2,934
 Gross profit 943 841 2,592 2,276
 Operating expenses:
 Administrative 282 274 776 746
 Selling 457 396 1,214 992
 739 670 1,990 1,738
 Income from operations 284 171 602 538
 Pension plan cost (7) (9) (20) (23)
 Total income from operations 197 162 582 515
 Integral cost of financing 41 (59) 125 (17)
 Other expenses, net (9) (21) (32) (27)
 Income for the period before
 tax on assets, employee profit
 sharing and extraordinary
 items 147 200 425 505
 Income tax, tax on assets and
 employee profit sharing 72 78 187 224
 Comparable net income 75 122 238 281
 Mineral Water business
 net income -- -- -- 20
 Income before extraordinary
 items 75 122 238 301
 Credit from utilization of
 tax loss carryforward -- 28 42 82
 Extraordinary items 349 (58) 349 542
 Net income for the period 424 92 629 925
 Consolidated Financial Statements
 At Sept. 30, 1993 and Dec. 31, 1992
 Amounts in Millions of Constant New Pesos (NS)
 Assets 1993 1992
 Current assets:
 Cash and marketable securities N$ 163 N$ 233
 Accounts receivable:
 Notes 28 19
 Trade 385 306
 Other 88 73
 501 398
 Finished products and in process 285 278
 Raw materials and supplies 767 795
 1,052 1,073
 Prepaid expenses 78 91
 1,794 1,795
 Investments and other assets:
 Shares and securities 9 7
 Long-term notes receivable 7 8
 Other assets 7 26
 23 41
 Property, plant and equipment:
 Land 894 893
 Building, machinery and equipment, net 6,168 6,361
 Construction in progress 566 298
 7,628 7,552
 Deferred charges, net 171 136
 Total assets N$ 9,616 N$ 9,524
 Liabilities and Stockholders' Equity
 1993 1992
 Current liabilities:
 Bank loans and euro-commercial paper N$ 216 N$ 608
 Current maturities of long-term debt 205 185
 Interest payable 44 83
 Suppliers 430 526
 Tax payable 73 149
 Accounts payable, accrued expenses
 and other liabilities 204 131
 1,172 1,682
 Long-term liabilities:
 Bank loans and debentures 2,394 2,807
 Notes payable 2 2
 Current maturities of long-term debt (205) (185)
 2,191 2,624
 Pension plan liability and
 seniority premium 444 441
 Other liabilities 3 3
 447 444
 Total liabilities 3,810 4,750
 Stockholders' equity:
 Minority interest in consolidated
 subsidiaries 546 --
 Majority interest:
 Capital stock 248 248
 Additional paid-in capital 2,507 2,210
 Retained earnings 3,110 2,635
 Net income for the period 610 541
 Cumulative result of holding
 nonmonetary assets (1,215) (860)
 Total majority interest 5,260 4,774
 Total Stockholders' equity 5,806 4,774
 Total Liabilities
 and Stockholders' equity N$ 9,616 N$ 9,524
 -0- 10/28/93
 /CONTACT: Hernan Miguel of FEMSA, 011-528-345-6005, or Cathleen Mayrose of Dewe Rogerson, 212-688-6840/

CO: Fomento Economico Mexicano, S.A. de C.V. ST: IN: FOD SU: ERN

TM-CK -- NY143 -- 8286 10/28/93 22:26 EDT
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Publication:PR Newswire
Date:Oct 28, 1993

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