FEMSA 2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023; filed April 23, 2024. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS and reported primarily in nominal Mexican pesos (Ps.).
Business context
FEMSA operates Coca-Cola FEMSA, retail businesses (OXXO and other proximity stores, pharmacies and fuel stations), and Digital@FEMSA. Its FEMSA Forward strategy prioritizes retail, beverages and digital solutions. Mexico generated 65% of consolidated revenue in 2023. Comparisons are affected by acquisitions, currency translation, inflation accounting in Argentina, and businesses reclassified as discontinued operations.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | Ps. 702,692 million (+17.7%) | Ps. 597,008 million |
| Gross profit / gross margin | Ps. 279,507 million / 39.8% | Ps. 241,518 million / 40.5% |
| Continuing-operations net income | Ps. 44,439 million | Ps. 33,320 million |
| Discontinued-operations net income | Ps. 32,238 million | Ps. 1,423 million |
| Consolidated net income | Ps. 76,677 million | Ps. 34,743 million |
| Net income attributable to parent shareholders | Ps. 65,689 million | Ps. 23,909 million |
| Cash from operating activities | Ps. 49,679 million | Ps. 72,576 million |
| Cash from investing activities | Ps. 132,292 million | Ps. (46,432) million |
| Cash used in financing activities | Ps. (92,552) million | Ps. (35,898) million |
| Cash and cash equivalents | Ps. 165,112 million | Ps. 83,439 million |
| Consolidated debt | Ps. 136,824 million | Ps. 191,741 million |
Reported debt less cash implies Ps. 28,288 million of net cash, before considering lease liabilities. Lease liabilities were Ps. 96,073 million (Ps. 12,236 million current and Ps. 83,837 million non-current). Total assets were Ps. 805,856 million and total equity Ps. 378,369 million. The reported average borrowing cost, after swaps, was 7.1%, versus 4.8% in 2022; 82.6% of debt was fixed-rate after hedging.
Cash from operations fell 31.5%, reflecting higher tax payments, weaker receivables movements and cash outflows from discontinued operations. Investing cash inflows were boosted by disposals, including Heineken, Jetro Restaurant Depot and Envoy. Capital expenditure, net of disposals, rose to Ps. 38,611 million from Ps. 34,410 million.
Segment performance and changes
- Coca-Cola FEMSA: Revenue increased 8.1% to Ps. 245,088 million; gross margin rose 1.0 percentage point to 45.2%. Sales volume increased 7.8% to 4,047.8 million unit cases. Higher sweetener costs partly offset lower packaging costs and hedging benefits.
- Proximity Americas: Revenue rose 19.0% to Ps. 278,520 million; same-store sales increased 14.2%, and the division added 1,408 net OXXO stores, ending the year with 22,866.
- Proximity Europe: Revenue was Ps. 43,552 million versus Ps. 9,809 million in 2022. The comparison is not like-for-like: 2022 included only the final 23 days of October and November–December after Valora’s acquisition.
- Health: Revenue increased 0.7% to Ps. 75,358 million; gross margin improved 0.5 percentage point to 29.9%. Growth in locations and same-store sales was partly offset by currency translation, competitive pressure and a Ps. 527 million write-off related to a Colombian institutional customer.
- Fuel: Revenue increased 12.9% to Ps. 58,499 million; same-station sales rose 7.8%. Gross margin declined 0.1 percentage point to 12.6%, partly due to a shift toward institutional and wholesale sales.
Consolidated gross margin decreased to 39.8%, and selling expenses increased to 26.9% of revenue from 25.0%. Net income growth substantially reflects one-time and portfolio effects, not just ongoing operations: discontinued operations contributed Ps. 32,238 million, including the gain and accounting effects related to FEMSA’s Heineken divestment. Other income rose to Ps. 13,102 million, including proceeds-related gains and investment income. FEMSA also recorded a Ps. 9,849 million foreign-exchange loss, largely related to its U.S.-dollar cash position as the peso appreciated.
Outlook, risks and unusual items
- Management budgeted 2024 capital expenditure of Ps. 51,354 million, subject to change; the largest allocations are Ps. 24,359 million for Coca-Cola FEMSA and Ps. 20,527 million for Proximity Americas. No consolidated revenue or earnings guidance is provided in the filing.
- FEMSA announced plans to divest Solistica and other non-core businesses within a year of the report. In 2023 it sold most of its Heineken interest, divested Jetro Restaurant Depot, and merged Envoy Solutions with BradyIFS, retaining about 37% of the combined company.
- After year-end, shareholders approved regular and extraordinary dividends payable in four installments during April 2024–January 2025, and authorized up to Ps. 34,000 million of 2024 share repurchases. FEMSA also entered a $400 million accelerated share repurchase agreement, with final settlement expected by the third quarter of 2024.
- Recorded provisions for tax, labor and legal contingencies totaled Ps. 4,323 million. Separately, the filing reports Ps. 140,462 million of contingencies assessed as more than remote but less than probable, principally involving tax disputes; management says it does not expect a material adverse outcome. Brazilian tax contingencies of Ps. 13,692 million were collateralized.
- Key risks include dependence of Coca-Cola FEMSA on TCCC bottler agreements and concentrate supply; inflation and commodity costs; foreign-exchange and interest-rate movements; water availability; competition and slower store growth; cybersecurity and privacy; regulatory and tax changes, including sugar and plastics taxes; and political, economic and security conditions in operating markets.
- Auditors issued an unqualified opinion on the IFRS financial statements and on internal control over financial reporting. The NetPay acquisition was excluded from the internal-control assessment.
Important facts for investors to verify
- Reconcile continuing-operations earnings and cash generation with reported consolidated net income, given the substantial discontinued-operations and divestiture contribution.
- Review the terms, cash collection schedule and credit risk of the Jetro note receivable, and the value and accounting treatment of FEMSA’s retained IFS TopCo and Heineken-linked interests.
- Assess the Ps. 140,462 million unreserved contingency exposure, the status of Brazilian tax litigation and related collateral, and the adequacy of recorded provisions.
- Evaluate liquidity and debt service including Ps. 96,073 million of lease liabilities, upcoming maturities, currency exposures and the holding company’s dependence on subsidiary distributions.
- Check execution of the 2024 capital-spending plan, non-core divestitures, share repurchases and approved dividends; confirm that operating growth and margins support these uses of capital.