Coca-Cola FEMSA, S.A.B. de C.V. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; filed April 14, 2023. This is an annual report, not a standalone 2022 Q4 report. The filing does not provide a clear standalone Q4 income statement or quarterly financial metrics. Financial statements are prepared under IFRS and presented in nominal Mexican pesos (Ps.), with U.S. dollar translations for convenience only.
Business context
Coca-Cola FEMSA is the world’s largest Coca-Cola franchise bottler by volume, operating in Mexico, Central America, Colombia, Brazil, Argentina and Uruguay, with an investment in Venezuela. Mexico and Brazil generated approximately 75.4% of 2022 revenue. The company acquired Brazilian bottler CVI in January 2022 and the Cristal bulk-water business in southeast Mexico in November 2022.
Key financial and operating metrics
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Total revenue | Ps.226,740 million | Ps.194,804 million | Up 16.4%; up 17.8% on management’s comparable basis excluding currency translation and CVI acquisition effects |
| Net sales | Ps.226,222 million | Ps.193,899 million | Other operating revenue was Ps.518 million |
| Gross profit / margin | Ps.100,300 million / 44.2% | Ps.88,598 million / 45.5% | Profit up 13.2%; margin down 130 basis points |
| Net income | Ps.19,626 million | Ps.16,331 million | Up 20.2%; attributable to parent equity holders, Ps.19,034 million, up 21.2% |
| Basic and diluted EPS | Ps.1.13 | Ps.0.93 | Per share |
| Operating cash flow | Ps.35,491 million | Ps.32,721 million | Investing cash outflow was Ps.19,597 million; financing cash outflow was Ps.20,847 million |
| Capital expenditure | Ps.19,665 million | Ps.13,865 million | Focused on production, distribution, coolers, returnable packaging and IT |
| Cash and cash equivalents | Ps.40,277 million | Ps.47,248 million | Current assets were Ps.79,212 million; current liabilities were Ps.57,960 million |
| Total debt | Ps.78,669 million | Ps.85,782 million | Ps.8,524 million current and Ps.70,145 million long-term; cash less debt implies net debt of about Ps.38.4 billion |
Performance changes and management commentary
- Sales volume increased 8.6% to 3,755.2 million unit cases; average price per unit case rose 10.9% to Ps.58.75. Management cited pricing and revenue-management actions, volume growth and market-share gains.
- Growth was broad-based: sparkling beverage volume rose 6.4%, still beverages 21.7%, bottled water excluding bulk water 29.0%, and bulk water 5.8%. Reported results include CVI from February 2022.
- Gross margin contracted as higher concentrate costs in Mexico and higher PET resin and sweetener costs outweighed pricing, mix and hedging benefits. PET resin prices in U.S. dollars rose 23.5%; average sugar prices in U.S. dollars, after hedging, rose approximately 12.4%.
- Administrative and selling expenses increased 13.6% in amount but declined 80 basis points as a share of revenue to 30.4%, reflecting efficiencies partly offset by fuel and maintenance costs.
- South America segment revenue increased 21.2% and gross profit 22.5%; its gross margin expanded 50 basis points to 40.0%. Mexico and Central America revenue increased 13.1%, while gross margin declined 210 basis points to 47.4%.
Liquidity, debt, outlook and notable items
- Management said cash, together with operating cash generation, was sufficient for operating requirements. Cash declined during 2022, with outflows including dividends, debt repayment and acquisitions. Most sales are cash-based, while suppliers are generally paid on credit.
- Debt decreased Ps.7,113 million year over year. After swaps, 23.2% of debt was variable-rate on a weighted-average-life basis; management estimated a 100-basis-point rate increase would raise 2022 interest expense by Ps.203 million.
- Management budgeted 2023 capital expenditure at 8%–9% of revenue, subject to market conditions, and expected internally generated funds to cover it. The filing provides no specific revenue or earnings guidance.
- 2022 financing expense was Ps.4,549 million, up from Ps.4,219 million. The year included a Ps.324 million foreign-exchange loss and Ps.672 million loss on financial instrument market values; interest expense increased to Ps.6,500 million. A lower effective tax rate—25.4% versus 28.9%—supported earnings.
- Comparison with 2021 includes an unusual Ps.1,083 million benefit recognized in 2021 for Brazilian Manaus Free Trade Zone concentrate tax credits. Brazil tax contingencies also contributed to higher 2022 other expenses.
- Recorded loss-contingency provisions totaled Ps.3,887 million. Separately, unsettled proceedings assessed as less than probable but more than remote were estimated at Ps.113,285 million, including approximately Ps.65,338 million of possible Brazilian tax contingencies; management said it did not expect the proceedings to materially affect consolidated results or financial position. Brazilian authorities required collateral of Ps.13,728 million for tax cases in litigation.
- Risks include dependence on Coca-Cola brands and bottler agreements, concentrate and packaging costs, water availability, currency and inflation exposure, taxes and regulation, competition, climate and supply disruptions, and cyber risk. Two major Mexican bottler agreements were scheduled for renewal in June 2023. Colombia’s added-sugar beverage tax was scheduled to begin in November 2023.
- Sustainability-linked Mexican bonds require water-use ratios of 1.36 by 2024 and 1.26 by 2026; failure to meet targets triggers a 25-basis-point interest-rate increase. The company reported a 2022 water-use ratio of 1.46.
- The auditor issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. Key audit matters included impairment testing of distribution rights and goodwill and recoverability of deferred tax assets.
Most important facts for investors to verify
- Review the audited financial statements and notes for debt maturities, derivative exposures, cash restrictions and the composition of cash balances.
- Assess whether pricing can continue to offset raw-material, concentrate, labor, fuel and other cost inflation without weakening volume or mix.
- Track the resolution, provision coverage and collateral requirements for Brazilian and other tax, labor and legal proceedings; distinguish recorded provisions from larger possible exposures.
- Confirm renewal status and terms of the Mexico bottler agreements identified as due in June 2023, and evaluate future renewals in other territories.
- Monitor 2023 capital spending, acquired-business integration, currency translation, and progress toward sustainability-bond water targets.